Barclays bank has released a long-awaited update to its energy policy – which outlines its approach to fossil fuel financing.
The UK banking giant has long been under fire for its status as Europe’s top fossil fuel financier (since 2016). It provided £151.5 billion to the industry in that time, securing its spot as one of the “Dirty Dozen” banks globally providing 50% of all financing to the fossil fuel industry.
The bank’s new policy fell dramatically short of what the world’s leading climate scientists and energy experts are clear is the minimum level of action necessary for averting catastrophic climate impacts: an immediate end to all financing for fossil fuel expansion. Barclays is also facing a customer boycott for its leading role in financing the weapons companies currently arming Israel’s military onslaught in Gaza.
Unfortunately, Barclays is not alone in financing activities which harpoon global climate efforts. All major UK high-street banks – NatWest, Lloyds, Barclays, Santander, and HSBC, known as the “Big Five” – continue to provide financing and financial services for fossil fuel expansion, despite the overwhelming international scientific and energy policy consensus that new oil, coal and gas projects will push the world past critical international climate targets. As UN Secretary General Antonio Gutterres put it, “investing in new fossil fuel infrastructure is moral and economic madness”.
Pressure on
Against this backdrop, universities are facing strong pressure from students and staff to move their day-to-day banking away from these fossil fuel financing banks, especially Barclays.
But the lack of alternative providers large enough to deliver financial services on the scale UK universities require, who also do not finance fossil fuel expansion, presents something of a conundrum. Some are simply switching to the “least bad” of the major players.
Leeds University, for instance, switched away from Barclays after significant student pressure in favour of Lloyds, the Big Five high-street bank that has given the least money to fossil fuels since 2016. Some of the UK’s largest charities and religious institutions have recently done the same.
But other institutions have been waiting on an alternative that is truly free of financing fossil fuel expansion, fearing that a switch to a bank that still finances fossil fuel expansion, even at relatively lower levels compared to Barclays, would be seen as greenwashing and counter to institutional commitments to combating climate change.
A solution may well be on the horizon, as a major grouping of institutions in the university sector have announced an innovative proposal to shift practice in the financial services market. Led by the University of Cambridge, a coalition of 60 education institutions, including 21 universities, has issued a public Request for Proposals for financial institutions which can meet universities’ core banking needs but which do not contribute to the financing of fossil fuel expansion.
The coalition of institutions, which includes the universities of Oxford, Leeds, St Andrews and UCL, currently hold more than £5 billion in cash on deposit at banks, or in money-market funds.
Carrot and stick
This is the prize potentially on offer for banks and asset managers submitting proposals to be considered by the Cambridge coordinating team. Successful proposals will have to prove that they can meet universities’ complex financial needs and standards – and provide concrete assurances that the institution does not provide financing for fossil fuel expansion.
The coalition is hoping that a ‘carrot and stick’ approach, combining the ‘carrot’ of potential new business with the ‘stick’ of reputational harm and lost deposits, can achieve a substantial shift in the policies of large fossil fuel-financing banks, or the creation of a suite of new university-appropriate products from smaller fossil fuel-free providers – or maybe even both.
The significance of this move cannot be overstated. Universities are some of the most high-profile and long-standing clients of UK banks, with relationships often extending back centuries. Their business is lucrative in and of itself. But as some of the most recognisable and respected institutions in the UK and globally, universities publicly supplying (or withdrawing) public support for financial institutions can have significant implications for the reputations of these organisations.
The reality is that major financial institutions have delayed taking the necessary steps to finance a net-zero-aligned transition. As the world’s leading climate scientists warn that “there is a rapidly closing window of opportunity to secure a liveable and sustainable future for all”, only rapid and radical action will meet the climate emergency on the scale that it exists.
Meanwhile, the mainstream financial sector too often continues to view climate action as an optional extra, taking half-steps in the right direction in response to intense pressure. Barclays’ recent policy update is just the latest example of this approach. If we want the likes of Barclays to stop taking half-steps forward and start running – and our collective future depends on compelling them to do so – this kind of pressure from universities and all other responsible institutions of conscience is vitally necessary.
Universities are starting to put their money where their mouth is. Now it’s over to the banks. Until they do the same, they risk haemorrhaging billions of pounds worth of business – and some of their most high-profile clients.
Students Organising for Sustainability UK are asking students to encourage their universities to join the coalition seeking financial providers that don’t finance fossil fuel expansion. Students can use SOS-UK’s email template to contact their university finance department alerting them to the project and urging them to take part.
