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By Josephine Moulds, Nimra Shahid
Barclays has been branded “totally dishonest” by one of its investors for calling tens of billions of dollars for fossil fuel companies “sustainable finance”.
The UK high street bank says it is helping to address climate change by raising $1 trillion in sustainable and transition finance by 2030. This includes sustainability-linked loans and bonds – in which a company agrees to meet certain climate-related targets or else face a higher interest rate.
But these targets can be weak and the penalties for failing to meet them paltry. The company can also use the money raised how it sees fit, meaning supposedly sustainable finance could fund polluting activities.
Andrew Harper of Epworth, an investment manager owned by the Methodist church that invests in Barclays, said: “We’re concerned because the bank is making such a substantial claim and the public thinks the climate emergency is being worked towards being solved. Meanwhile, the problem is getting worse and worse. We think it’s dishonest.
“If they are calling the financing of any fossil fuel companies’ sustainable finance that to me is greenwash.”
Barclays said: “We are committed to being transparent and report separately on the green finance, sustainable finance and the sustainability-linked finance mobilized towards our $1 trillion target, so stakeholders and investors have a clear understanding of what we are reporting.” It said it set out very clear requirements for energy clients’ targets and transition plans to access finance.
‘Deeply problematic’ deals
Barclays helped raise $41bn in sustainability-linked finance for fossil fuel companies last year, according to an analysis by the Bureau of Investigative Journalism of data from LSEG, the financial markets group. The $41bn figure covers the total value of the deals Barclays worked on alongside other banks. Barclays itself counts only the funding it is directly responsible for, which it said was $10.9bn across all sectors last year.
Katharina Lindmeier, responsible investments manager at the publicly owned workplace pension scheme Nest, which also invests in Barclays, said TBIJ’s findings were “very concerning”. She added: “We’ll be raising this research with their management team directly at the next opportunity.
“Regulators are looking closely at the issue of greenwashing and if there is any uncertainty, it’s better to be cautious than to mislead customers. Any loans which help companies expand oil and gas infrastructure should not be classed as sustainable.”
The Financial Conduct Authority, the UK regulator, wrote to banks last year highlighting concerns about this type of loan, including weak incentives, potential conflicts of interest, and low ambition. It said that these may lead to accusations of greenwashing.
Anders Schelde, chief investment officer of AkademikerPension, another Barclays investor, said sustainability-linked finance for oil and gas companies is “in most cases deeply problematic”. He said: “We don’t count sustainability-linked bonds and loans as green investments in our accounting because we know there are so many problems with them. The penalties are low and the targets often insufficient.”
Last year, Barclays helped raise $3bn worth of sustainability-linked loans and bonds for Enbridge, a company that is dramatically expanding oil and gas infrastructure across North America.
Enbridge is behind the construction of a controversial 1,000-mile pipeline that cuts through Indigenous land in the US to pump tar sands oil. It paid US police to crack down on protesters and has been fined millions of dollars for repeated environmental violations.
Barclays classifies the Enbridge debt as sustainable because the company has set a target to cut emissions from its operations. In part, it intends to do this by using solar power to pump oil through its pipelines.
“The real source of emissions from a company like Enbridge will be from the oil and gas its pipelines help transport,” said Jeanne Martin from responsible investment charity ShareAction. “We do not need greener pipelines, we need to stop the reckless expansion of the fossil fuel industry.
“If the conditions that a bank sets to provide financing to oil and gas transport companies don’t tackle oil and gas, the bank will be accused of greenwashing.”
Barclays also helped raise a $2.8bn sustainability-linked loan for Harbour Energy, the UK’s largest oil and gas producer. Harbour extracted the equivalent of nearly 70m barrels of oil last year, which if burned would produce the equivalent of eight coal-fired power stations’ annual emissions.
Scientists agree that developing any new oil and gas fields will derail climate targets and push global heating beyond 1.5 degrees which the UN says will threaten lives, food sources and economies worldwide.
It seems that Harbour is aggressively exploring new oil and gas as it hopes to extract a further 880 million barrels of reserves in the coming decades. It does not appear from Harbour’s public statements that the company has any plans to shift its focus to renewables.
Yet Barclays’ loan to Harbour Energy is called sustainable because the company has committed to reducing emissions from the process of extracting oil and gas. This, however, takes no account of the vast majority of Harbour’s emissions, which are generated from burning the oil and gas itself.
The notorious oil trader Trafigura also benefited from more than $5.4bn in loans that Barclays called sustainable finance. Counting its supply chain and all the emissions generated by the oil it trades and transports, Trafigura was responsible for more greenhouse gas emissions last year than Spain.
Trafigura’s interest payments are linked to certain sustainability targets, including a pledge to cut emissions – but only from its operations rather than the burning of the fuels it trades and transports. This accounts for about 1% of the company’s total emissions.
Trafigura said Barclays was one of 54 banks involved in the deal and said “sustainability-linked loans are an important tool in incentivizing reductions in emissions”. It added that its direct emissions were less than 1% of Spain’s. While it reports its indirect emissions, it does not consider all of them “to be within our current sphere of influence”.
Enbridgesaid it takes climate change seriously and is committed to reducing its greenhouse gas emissions. It said sustainability-linked finance plays an important role in meeting emission-reduction goals and supporting the transition to a lower carbon economy. The company also said that the 1,000-mile Line 3 pipeline had local and tribal approvals and met the strictest environmental standards and that payments to law enforcement were made via a third party.
Harbour did not respond to a request for comment.
Barclays said: “Sustainability-linked loans and bonds are an important sustainable finance tool, incentivising borrowers, particularly in hard-to-abate sectors, to achieve sustainability objectives over time.”
Net-zero banking
Barclays has committed to cut its emissions – including of the companies it finances – to net zero by 2050. To reach this target, it will have to stop providing money to companies that refuse to shift away from fossil fuels.
But a report out today shows that the bank’s funding for fossil fuels increased in 2023 from 2022, which troubled shareholders who have been urging it to reduce lending in line with its climate targets. Barclays was Europe’s top funder of the fossil fuel industry last year, according to the report led by the Rainforest Action Network.
Lindmeier, the Nest investment manager, said: “We want to see Barclays immediately reduce its financing to companies behind new fossil fuel expansion. Any delays could leave the company more exposed to bad loans and potentially cost them millions of pounds.”
Laura Hillis from the Church of England pensions board, another Barclays investor, said: “We are looking for banks to produce a clear climate plan and to see the commitments carry through into lending decisions. Our concern is that these fossil fuel financing figures show that is not happening at the pace we’d like.”
Climate-conscious investors have been putting pressure on Barclays to make good on its net-zero pledge and earlier this year the bank committed to stop providing specific project finance for oil and gas expansion and related infrastructure.
However, less than 2% of Barclays’ funding for oil and gas last year fell under the label of “project finance”. Almost all of it comes in the form of general, unrestricted finance for the companies undertaking those projects.
“Barclays’ new oil and gas policy is an important step forward for the bank but it should have gone so much further,” said Martin from ShareAction, which brought together Barclays shareholders to urge the bank to restrict lending to oil and gas companies.
“Ultimately, the bank has kept the right to finance companies that have plans to massively expand the fossil fuel industry with no strings attached, and that’s a real problem.”
CREDIT: THE BUREAU OF INVESTIGATIVE JOURNALISM
