Barclays will no longer provide project financing or similar direct financing to energy customers for upstream oil and gas expansion projects and related infrastructure, the bank announced on Friday.
This means that corporate lending will continue to be permissible, but as of January 2026, UK banks will no longer be able to lend to new customers for more than 10% of their total planned capital expenditure for oil and gas on expansion. This will no longer be done.
Since 2020, Barclays has stopped financing Arctic oil and gas and hydraulic fracturing of its European assets, and has also restricted funding for oil sands activities. In the future, the Amazon and super-heavy oil projects will be added to the exclusion list.
On the corporate side, as of June this year, companies that account for more than 20% of total oil and gas production in these sectors, or that carry out any activity, including exploration, in the Amazon will be excluded from any financing. be done.
Migration requirements
The bank said it would “continue to support the energy sector in transition, with a focus on diversified energy companies making low-carbon investments.” The company's energy customers will be asked to submit a “transition plan or decarbonization strategy” by January 2025.
Barclays clients will also be committed to a 2030 methane reduction target, a commitment to end most venting and flaring by 2030, and short-term Scope 1 and 2 (operational) alignment to net zero by January 2026. ) Emission targets need to be set.
Energy customers are also expected to provide scope 3 (indirect) absolute emissions reduction targets, although there is currently no short-term requirement.
The bank said it would apply restrictions to non-diversified energy customers working on long-lead expansions where “demand is very limited.”
limited upstream funds
The phrase “long-lead expansion” refers to a recent International Energy Agency report that stated that “no new long-lead upstream oil and gas projects are needed in a net-zero emissions scenario.” This seems to imply an expansion of some short lead-time projects. Acceptable.
Indeed, this scenario involves oil and gas investment in existing projects and some oil and gas investment in what appears to be new development “for example, enhanced oil recovery and continued tight oil and shale gas drilling.” Christophe McGlade of the IEA told Energy Intelligence. However, he stressed that those involving exploration, new basins or new infrastructure in existing basins are excluded.
In some cases, Barclays “may enter into sustainable finance or transition finance transactions with entities within the group that would otherwise be restricted” as a result of the application of upstream oil and gas policies. points out. This will only happen on the condition that the funds are “not used directly to support oil and gas activities.”
emissions target
Most European banks have absolute reduction targets for the oil and gas emissions they finance. This is less ambitious, from France's BNP Paribas' oil (not gas) exposure of -80%, French peers Credit Agricole and Société Générale, Switzerland's UBS and Sweden's SEB's -70% to 75%. There is a range of minus 20% to 30% when the target is not met. institution. Barclays is in the middle, down 40% from its 2020 base.
By contrast, most U.S. and Canadian banks have set emissions intensity targets, with a few exceptions including Citigroup and Wells Fargo. But critics say these systems are insufficient because they allow banks to continue expanding oil and gas lending.
Citing Bank of America, Sierra Club's Adele Schleiman said recent moves suggest that U.S. banks may even be backsliding.
The bank recently announced a new environmental and social risk policy framework that replaces the complete exclusion of thermal coal and Arctic oil with an “enhanced due diligence” process and possible exceptions.
But Schleiman said the policy change was primarily aimed at “appeasing” U.S. politicians who are targeting financial institutions' efforts to combat climate change, and that Bank of America would be less likely to invest in Arctic drilling or new coal. It still considers the chances of funding to be “very low.”
Barclays, once one of the world's largest fossil fuel investors, has significantly downsized its business since 2020, according to the activist nonprofit that publishes the annual report “Climate Banking.''
Barclays was ranked in the top 10 of the report's rankings from 2016 to 2020, but fell to 14th in 2021 and 13th in 2022. Top fossil fuel investors consistently include US companies JPMorgan Chase, Citi, Wells Fargo and Bank of America. with RBC in Canada.
