Dive Brief:

• Barclays pledged Monday to reduce the carbon emissions it creates or funds to net zero by 2050, aligning itself with the goals and timelines of the 2015 Paris climate agreement.
• The initiative represents a back-step from what investors sought when they pressured the bank to phase out fossil fuel lending in a resolution filed in January.
• Barclays has provided more than $118 billion in funding for fossil fuels since 2016, making it Europe’s top lender in that category and the seventh-biggest globally, data from the Rainforest Action Network showed.

Dive Insight:

Barclays' pledge comes as a number of other banks have strengthened their climate policies. Most notably, Goldman Sachs in December announced plans to commit $750 billion in loans, underwriting, advisory services and investments over the next decade toward renewable energy, sustainable transportation, affordable education and other areas.

Barclays was one of 130 banks to sign on to the United Nations' Principles for Responsible Banking in September. Research has indicated climate commitments make financial sense, as banks can reduce risks and increase earnings potential by reallocating capital to greener companies and investments, a February study by Oliver Wyman found. And the market for "responsible" lending has grown 40% since 2018, according to S&P Global.

The bank said it would first strengthen its standards in the energy and power sectors, providing transparent targets to track progress and reporting on them regularly, beginning next year.

Barclays would restrict thermal-coal financing, only backing firms whose thermal-coal activities represent less than 30% of revenue by 2025 and less than 10% of revenue by 2030, Chairman Nigel Higgins said in a letter to shareholders seen by The Wall Street Journal. The bank also said it would no longer support new Arctic drilling and will not finance fracking in the U.K. or Europe. However, it would continue funding companies involved in tar sands projects in Canada that aim to cut their emissions, The Guardian reported.

The bank is also targeting at least £100 billion of green financing by 2030 and will invest £175 million in environmental innovation over the next five years, according to the Financial Times.

Barclays' board will vote on both climate proposals — the January resolution from investors and the net zero plan that the bank calls an "ambition" — at its annual board meeting May 7.

ShareAction, which coordinated the shareholder proposal, asked for investors to back both. Doing that would "cement the bank’s new high-level climate commitment while at the same time insisting on the near-term ambition needed to deliver results," Wolfgang Kuhn, ShareAction’s director of finance sector strategies, told the Financial Times.

Lankelly Chase, a charitable foundation that also contributed to the shareholder resolution, was less impressed.

By proposing an ambition rather than a firm commitment, Barclays was "asking permission to fall short of its own obligations," the foundation said, noting that the bank last year increased financing for oil, gas and coal companies by £2.9 billion, according to Reuters.

"Investors should note that the UK government has already enshrined a commitment to net-zero by 2050 in law and that Barclays is merely repeating undertakings it has made under the Principles for Responsible Banking," the foundation said, according to the Financial Times.

Reaching net zero — the break-even point between the amount of carbon released through a company’s efforts and the amount it sequesters or offsets — is by no means unreachable. Bank of America, which ranks higher on RAN’s fossil-fuel financing index than Barclays — announced it had reached carbon neutrality in January by cutting emissions at its facilities in half since 2010, purchasing renewable electricity and buying carbon offsets.

Other banks have promised this year to restrict their fossil-fuel financing. UBS Group vowed in March to stop financing new offshore-oil projects in the Arctic, thermal-coal mines or oil sands on undeveloped land. Royal Bank of Scotland Group in February said it would end financing for coal by 2030.

Natasha Landell-Mills, head of stewardship at asset manager Sarasin & Partners, said Barclays’ next step may be the most crucial one. "What matters now is that the board sets robust nearer-term targets that leave no doubt about its determination to deliver net-zero emissions by 2050," she told The Wall Street Journal.