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Press release: 27 February 2020
ClientEarth lawyers have reminded board members of one of the UK’s biggest banks of their legal obligations to address climate change risks as the bank prepares to decide if it will support a major climate resolution tabled by key investors last month.
Coordinated by charity ShareAction, the resolution asks the bank to phase out its financing of fossil fuel companies that are not aligned with the Paris climate goals. It’s the first climate-related shareholder resolution at a European bank.
In a legal letter to each of Barclays’ Board members, ClientEarth CEO James Thornton has urged members to formally support the resolution.
Barclays has invested US$85 billion into fossil fuel companies, making it the largest financier of fossil fuels in Europe, and the sixth largest in the world. ClientEarth lawyers argue that any decision by Barclays to actively continue supporting businesses that are directly accelerating global temperature rise makes the bank complicit in the environmental and economic damage these businesses cause.
Thornton said: “The financial risks of climate change are greater in scale and closer in time than many in the financial world appreciate. These risks aren’t limited to near-term shocks or stranded assets – they include macroeconomic risks that stretch across the whole system and put trillions in jeopardy.
“Financial heavyweights like Barclays hold our financial and environmental future in their hands and the law requires their directors to act. Board members can choose to be on the right side of history by recommending a vote in favour of ShareAction’s climate resolution.”
ClientEarth also contends that Barclays cannot claim to be pursuing alignment with the Paris Agreement until it has adopted and acted on the actions directed by the resolution.
Given Barclays’ position as a founder and co-signatory of the Principles of Responsible Banking, which commits signatories to align with the Paris Agreement, ClientEarth says that snubbing the resolution may be seen as “hypocritical and misleading”.
Thornton said: “Barclays is lagging behind its European peers on climate action and is rapidly becoming an outlier in terms of its approach to the Paris goals. Before slipping any further behind, it is time for the bank to take action and stop dragging its feet on the climate crisis.”
Board members are required by law to consider and manage material risks to their business, including climate change. Failure to do so will lead to increasing commercial, reputational and legal risks. Under the Companies’ Act, company directors must act in a way that they consider most likely to promote the success of the company. In doing so, they are required to have regard (among other things) to:
• The likely consequences of their decisions in the long term;
• The impact of the company’s operations on the environment and;
• The company’s reputation.
ClientEarth’s letter sets out reasons why these matters are directly relevant to the Directors’ legal duties regarding the resolution.
The letter states:
Taking the actions proposed by the Resolution and transparently reporting against progress is clearly in the best interests of Barclays, your shareholders, employees, customers, and the communities you serve. Your directors’ duties require and empower you to act. You can and should support this Resolution.
The climate resolution in question, spearheaded by charity ShareAction, was filed in January by 11 institutional investors, which collectively manage £130bn and include British public pension funds Brunel Pension Partnership and LGPS Central, as well as 100 individual shareholders. Since then, several influential investors including Amundi, Nest and The Church Commissioners have announced they would vote in favour of the resolution.
The resolution requests that Barclays publish a plan to gradually stop the provision of financial services (including project finance, corporate finance and underwriting) to gas and electric utilities and other companies in the energy sector that are not aligned with the goals of the Paris Agreement.
Climate change is a systemic business risk. Physical assets and operations are already being hit by extreme weather, and this is set to worsen. Banks have a vital role to play in the transition away from fossil fuels. Barclays has invested US$85 billion into fossil fuel companies. That makes it the largest financier of fossil fuels in Europe, ranking 6th in the world.
Public pressure is mounting. Our recent survey shows that more than six in ten people (62%) did not know that their bank could be investing their money in fossil fuels, and 67% of young people think financial institutions and banks should be legally accountable if they don’t ditch fossil fuels.
Investors will vote on the resolution at Barclays’ annual general meeting in May 2020. Barclays’ Board will issue its voting recommendation on this resolution imminently in its notice for the annual general meeting.
ClientEarth has previously helped to coordinate climate change resolutions requiring BP and Shell to assess and manage the risk of climate change.
ClientEarth is a charity that uses the power of the law to protect people and the planet. We are international lawyers finding practical solutions for the world’s biggest environmental challenges. We are fighting climate change, protecting oceans and wildlife, making forest governance stronger, greening energy, making business more responsible and pushing for government transparency. We believe the law is a tool for positive change. From our offices in London, Brussels, Warsaw, Berlin and Beijing, we work on laws throughout their lifetime, from the earliest stages to implementation. And when those laws are broken, we go to court to enforce them.