World’s seventh largest fossil-fuel-funding bank dumps oilsands financing in Canada

Shareholder activists concerned about the climate notched a win Wednesday when London-headquartered bank Barclays announced it will stop financing oilsands projects this year.

Starting in July, Barclays will not directly finance new oilsands exploration, production or processing, and will further restrict financing to companies earning more than 10 per cent of their revenue from those activities. The bank is the world’s seventh largest financier of fossil fuels.

The move follows HSBC’s decision last year to phase down its fossil fuel financing as well as a long-running campaign from advocacy group ShareAction to convince Barclays to clean its portfolio of fossil fuels. Last week, ShareAction co-ordinated 27 investors, representing US$1.4 trillion worth of assets under management, to send a letter to Barclays management urging the bank to cut off financing for new oil and gas fields by the end of this year.

This week’s announcement was a beginning, but there is room for improvement, climate advocates say. Barclays still allows financing for new oil and gas projects despite the International Energy Agency saying there is zero room for any new fossil fuel development if the world is going to hit the Paris Agreement goal of holding global warming to 1.5 C.

“Barclays has taken an encouraging step forward today in tightening its restrictions around oilsands finance, after years of investors pushing for change on the issue,” ShareAction’s head of banking, Jeanne Martin, said in a statement Wednesday. “Barclays should step up and act swiftly to update its oil and gas policy ahead of its 2023 AGM (annual general meeting).

“Otherwise, the bank should be prepared to deal with further shareholder action to encourage Barclays to meaningfully align with its net-zero goal.”

From 2016 to 2021, Barclays financed fossil fuels around the world to the tune of US$167 billion. In Canada, over that period, it provided $1.7 billion to MEG Energy, $1.6 billion to Enbridge, $670 million to Cenovus, $500 million to Canadian Natural Resources and $42 million to Teck Resources, among others.

In its annual report published Wednesday, Barclays explains how it tightened its financing rules for the oilsands. Previously, the bank had committed to only financing oilsands companies that have plans to significantly reduce their emissions per barrel to the global average by the end of the decade. Now, it has decided not to finance oilsands companies at all, regardless of their climate plans.

Greenpeace Canada senior energy strategist Keith Stewart told Canada’s National Observer that oilsands companies like Suncor, Cenovus, Canadian Natural Resources and others in the Pathways Alliance — a group of six companies representing the majority of oilsands production and promising to hit net-zero greenhouse gas emissions by 2050 — boast about their ability to reduce their emissions per barrel, but the Barclays decision is evidence international investors aren’t buying it.

"They can plaster that in their advertising and no one is going to check the fine print, but the bank's job is to actually look at the fine print, and Barclays has basically just given a vote of no confidence in the oilsands climate plans,” Stewart said, referring to the multibillion-dollar carbon capture plans the federal government intends to subsidize.

“I don't think Barclays is made up of people who are sitting around singing kumbaya, they're ruthless capitalists and they're looking at this and saying this is high risk, let's put our money somewhere safer,” he added.

The risk for banks is that as the energy transition to renewables unfolds globally, demand for fossil fuels will collapse, leaving their investments worth less, if not worthless. As previously reported by Canada’s National Observer, Canadians stand to lose more than $100 billion in the energy transition as these fossil fuel assets become stranded.

Stewart explained that Barclays’ decision is proof the pool of available capital for Canadian oil companies to tap is shrinking.

Banks like Barclays exiting the oilsands is a similar trend to fossil fuel companies like BP, Shell and TotalEnergies leaving the region.

“With the exception of Exxon, we're seeing all of the global super majors exit the oilsands as high cost and high carbon, and that's meant there's been a reconcentration amongst Canadian firms, which makes them more vulnerable to stranded assets,” Stewart said.