High rise glass buildings

Responding to investor pressure, Barclays presents new, beefed up climate policy

After three months of investor discussions, Barclays has announced its ambition to be a net zero bank by 2050. At its upcoming annual general meeting, the bank recommends its shareholders vote in favour of a special climate resolution which contains commitments to align its financing activities with the Paris Agreement.

The announcement follows an earlier resolution brought by a group of investors in January of this year, led by responsible investment charity ShareAction. In response to this, ClientEarth CEO James Thornton wrote to Barclays’ Board reminding board members of their legal duties to address climate change risks.

Banks are dragging their feet on the climate crisis

Climate change is a vast threat to communities and the environment worldwide, and it also destroys wealth. Physical assets and operations are already being hit by extreme weather, and this is set to worsen. Financial institutions face climate-related risks that go far beyond the issue of social responsibility – left unchecked, these risks threaten to destabilise the global economy and destroy trillions in value.

Banks have a vital role to play in the transition away from fossil fuels. Yet they are massively investing in some of the most carbon-intensive and polluting industries. Even since the Paris Agreement was signed in December 2015, 33 of the world’s largest banks have invested some $2.7 trillion into fossil fuel companies.

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.

After years of opaque practices from banks, the investor community is now urging banks to align their financing decisions with the Paris climate goals.

Lawyers back the first climate-related shareholder resolution at a European bank

In January, 11 major investors filed a resolution asking Barclays — one of the UK’s top banks — to phase out its financing of fossil fuel companies that are not aligned with the Paris climate goals. Spearheaded by charity ShareAction, the resolution was filed by investors collectively managing £130bn. It was the first climate-related shareholder resolution at a European bank.

In a letter to Barclays’ Board, ClientEarth CEO James Thornton reminded board members of their legal obligations to address climate change risks.

He also argued 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.

Barclays bows to investor pressure

Barclays responded by putting forward its own climate resolution, in which it pledged to align all of its financing activities with the goals and timelines of the Paris agreement, starting with the energy and power sectors, and to publish “transparent targets” to track its progress.

ClientEarth lawyer Daniel Wiseman said: “With this resolution, Barclays has taken positive action on climate. The resolutions now before shareholders present an historic opportunity to transform Barclays from an industry laggard to a global leader on climate. They show why it is so critical that investors flex their stewardship muscles and demand action.”

But Barclays is still lagging behind its European peers on climate action. Since 2015, Barclays has invested £100bn into fossil fuel companies. That makes it the largest financier of fossil fuels in Europe, ranking seventh in the world. The bank also increased its financing for oil, gas and coal companies just last year.

Wiseman added: “The resolution proposed by Barclays is a good signal of intent – but it will be meaningless if not backed up by a strong and credible strategy to align all its activities with the Paris Agreement goals.

“Barclays’ move sends a clear signal to other financial heavyweights: continuing to finance activities that exacerbate climate change is unsustainable and compounds the risks climate change presents to business and society at large. Banks, pension funds and all other financial services companies should take note of these risks, as well as the legal risks which may ensue if they do not align with emerging industry standards.”

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Jimmy Chan