Barclays PLC, the London-based bank recently ousted from the Texas bond underwriting market because of its climate goals, said Feb. 9 that it is curtailing funding for fossil fuel projects worldwide.
Starting immediately, Barclays will no longer help existing energy clients finance new upstream oil and natural gas projects, and it imposed restrictions on most new clients working on such expansion projects.
But while the bank's new climate statement halts financing for European clients "materially engaged" in hydraulic fracturing, that restriction does not apply to the US. According to the US Energy Information Administration, this method is used for most oil and natural gas produced in the US.
The policy protects most of Barclays' existing clients in the shale oil and natural gas business, according to an analysis of the bank's new commitments by ShareAction, an investor advocacy group that engaged with the bank over its fossil fuel investments. Hydraulic fracturing is banned or under moratorium across much of Europe, and most of Barclays' clients in that space are operating in the US, the group said. The US produces more oil and natural gas than any other nation.
A Barclays spokesperson confirmed that the US is excluded from the hydraulic fracturing direct finance ban but declined to comment on the reasons why. The spokesperson emphasized that the restrictions on oil and gas expansions also apply to expansions of US fracking operations.
Between 2016 and 2022, Barclays — Europe's fifth-largest bank — provided nearly $34 billion in finance for companies using hydraulic fracturing to extract and transport oil and natural gas, according to the 2023 edition of "Banking on Climate Chaos." The report is produced annually by environmental advocacy groups tracking the financial sector's fossil fuel investments.
Among commercial banks operating in the US, however, Barclays' footprint is relatively small. In September 2023, it ranked 52nd with $38.4 billion in assets, according to the US Federal Reserve.
Along with the moratorium on finance for upstream oil and gas expansion projects, Barclays' energy clients have until 2026 to set near-term targets for reducing greenhouse gas emissions from their operations, known as Scope 1 and 2 emissions. In addition, the bank will only provide financing to energy clients that commit to reducing methane emissions and ending routine flaring by 2030.
The goal does not extend to emissions caused by consumer use of oil and natural gas products. Such indirect emissions, known as Scope 3, make up the bulk of the industries' total footprint.
Contrast to US banks
While limited, Barclays' climate plan stands in contrast to the recent "backsliding" by major US banks, the Sierra Club said in a statement.
As an example, the group noted that Bank of America Corp. recently walked back a 2020 commitment to halt financing for drilling in the Arctic. Under the new policy, funding decisions for Arctic drilling will instead be evaluated by the bank's "senior-level risk committee" on a case-by-case basis, Bank of America said in a December 2023 report outlining environmental and social risks.
Like the Sierra Club, ShareAction welcomed the new Barclays policy for its "positive commitments" but said it should have gone further.
"Barclays is wrong not to have ruled out financing companies that focus exclusively on fossil fuel extraction," Kelly Shields, ShareAction's campaign manager, said in a statement. "This should include fracking, which is causing so much environmental and social harm and is an activity the bank is heavily exposed to."
As it works toward decarbonization, Barclays said it "understands the critical importance of energy being secure, reliable and affordable" for customers and clients. The bank has set a goal to provide $1 trillion in sustainable and transition finance by 2030.
"We continue to work with our energy clients as they decarbonize and support their efforts to transition in a manner that is just, orderly and addresses energy security," Laura Barlow, Barclays' head of sustainability, said in a Feb. 9 statement. "Today we strengthen our commitment to the energy transition, with policies that will focus our capital and resources to the energy companies that play a key role in the transition."
