Addressing climate change

In March 2020 we were one of the first banks to announce our ambition to be a net zero bank by 2050, by reducing our own operational emissions and our financing of our clients’ emissions.

We are clear that addressing climate change is an urgent and complex challenge that demands a fundamental transformation of the global economy.

To reach net zero emissions and keep the global temperature increase to 1.5°C requires:
1. An enormous increase in low-carbon technologies, infrastructure and capacity
The final decision text from COP27 (link) stated that $4trn per year needs to be invested in renewables to be able to reach net zero emissions by 2050 and furthermore, a global transformation to a low-carbon economy is expected to require investments of between $4-6trn per year (link).

2. A co-ordinated reduction in carbon intensive activity, including fossil fuel consumption
The International Energy Agency, which helps governments to set energy policy based on scientific data, estimates that fossil fuels will need to reduce from 79% to 22% of the world’s energy supply by 2050. (link)

We therefore have a three-part strategy to turn our net zero ambition into action.

What does this mean in practice?

Alongside our work to reduce our operational emissions, our climate strategy means we are expanding our green and sustainable financing activities, whilst reducing our financed emissions, focusing on the highest-emitting sectors first. This includes Energy (coal, oil and gas) and Power.

We expect to see continued growth in our green and sustainable financing, aligned to our group-wide strategic objective to capture the opportunities from the transition to a low-carbon economy, supporting our customers and clients through this period of extraordinary change.

In the last year, energy security has joined sustainability and affordability as a major challenge. The financial sector has an important part to play in ensuring that we help address all three dimensions – the energy trilemma. We recognise that a faster transition from fossil fuels to lower carbon energy is necessary to meet the Paris Agreement goals. All this needs to be done affordably and in an orderly fashion and in collaboration and alignment with governments' energy strategies.

Why are we still financing companies in the Energy and Power sectors?

The International Energy Agency, which helps governments to set energy policy based on scientific data, estimates that fossil fuels will need to reduce from 79% to 22% of the world’s energy supply by 2050. Fossil fuels – especially gas – will remain part of the energy mix as we transition over the next 30 years, even in a 1.5°C aligned pathway.

We are committed to aligning all our financing to the goals and timelines of the Paris Agreement, consistent with limiting the increase in global temperatures to 1.5°C and this is reflected in our near-term targets to reduce our financed emissions i.e. the client emissions associated with our financing activity. We believe that Barclays can make the greatest difference by supporting our clients to transition rather than simply phasing out support for them. Many highly carbon-intensive sectors require finance to transition, in particular Power and Energy where huge investments are needed to increase low-carbon capacity while meeting the world’s growing energy demands. Where companies are unwilling to reduce their emissions consistent with science-based pathways, they may find it difficult to access financing, including from Barclays.

We have set 2030 targets that integrate the IEA’s Net Zero 2050 scenario in five of the highest emitting sectors in our financing portfolio – Energy, Power, Cement, Steel and Automotive Manufacturing. We have also assessed our financed emissions for our UK Residential Real Estate portfolio and have identified the 2030 emissions intensity ‘convergence point’.

In the coming years we will continue to set targets for other sectors, progressing the work we began in 2020 when we announced our net zero ambition and started by setting 2025 targets for the Energy and Power sectors.

Our financed emissions for the energy sector have dropped by 32% since 2020, exceeding our target of a 15% reduction by 2025, and the emissions intensity of our Power portfolio has dropped by 9% since 2020.

We are being fully transparent about the progress we are making. We measure our financed emissions and track them at a portfolio level against our targets using our ‘BlueTrack’ methodology.

How do we support sustainable financing?

We surpassed our 2018 target to deliver £150bn of social and environmental financing by 2025 and we are on track to meet our target to deliver £100bn of green finance well ahead of our 2030 target date, having already delivered £87.8bn¹.

As a result, and after a strategic review of the bank’s capabilities, market demand and growth opportunities, Barclays has a new target to facilitate $1trn of Sustainable and Transition Financing between 2023 and the end of 2030. This encompasses the long-term Green, Social, Transition and broader Sustainable Financing requirements of our customers and clients.

We also have a mandate to invest up to £500m of our own capital into climate-tech start-ups helping them to scale solutions to environmental challenges and fill their growth stage funding gaps. The Sustainable Impact Capital investments have supported many aspects of climate-tech innovation, from property retrofit solutions to long-duration energy storage and hydrogen technologies.

In 2018, Barclays led the market as one of the first UK lenders to launch a Green Mortgage. Since inception, Barclays has lent over £2.6bn to Green Home mortgage customers with £1.6bn of financing delivered in 2022. In 2022, Barclays expanded Green Home mortgages to include buy-to-let properties, supporting more customers to purchase an energy efficient new-build home.

1 Barclays 2022 Annual Report