Barclays to stop funding new oil projects in victory for net zero groups

BARCLAYS is to stop directly financing new oil and gas projects after bowing to pressure from net zero activists.

The lender, which also separately announced a £600m takeover of rival Tesco Bank, has pledged to crack down on clients who pursue any new oil and gas-only strategies without also developing green alternatives. It will stop offering project finance or other direct finance to oil and gas expansion.

It forms a key plank of the bank’s revised climate change strategy, in which Barclays will set climate tests for its energy clients such as committing to 2030 methane reduction targets.

Barclays, which has been repeatedly targeted by protesters claiming it is failing to tackle climate change, is seeking to supply $1trillion (£792bn) of green financing to projects by 2030.

The bank will also pile greater scrutiny on companies solely focused on oil and gas. Diversified companies investing in low-carbon schemes will be supported more by the bank.

Daniel Hanna, Barclays’ head of sustainable finance, said: “Capital is critical to the energy transition, to decarbonise hard-to-abate sectors for the world to reach net zero emissions and create a resilient economy.”

Laura Barlow, Barclays’ head of sustainability, said that addressing climate change was a “critical and com- plex challenge”.

She added: “We continue to work with our energy clients as they decarbonise and support their efforts to transition in a manner that is just, orderly and addresses energy security.”

Responsible investment charity ShareAction welcomed the move but said the bank could have gone further.

Kelly Shields, campaign manager, said the bank should demand clients stop oil and gas exploration. She added: “Barclays is wrong not to have ruled out financing companies that focus exclusively on fossil fuel extraction. This should include fracking, which is causing so much environmental and social harm and is an activity the bank is heavily exposed to.”

Meanwhile, Barclays has struck a deal to buy the bulk of Tesco Bank for at least £600m in a bid to beef up its consumer lending business.

Barclays will take over Tesco Bank’s credit cards, unsecured personal loans, deposits and operating systems.

About 2,800 Tesco staff will also move over to Barclays. The move is likely to add more scale to Barclays’ credit card business, which has been shrinking over the past four years.

The bank will also take responsibility for selling Tesco-branded cards and financial products for a 10-year period. Ken Murphy, the Tesco chief executive, said the takeover would offer its banking customers “greater value”.

As part of the deal, Barclays will take £4.2bn of credit card balances, £4.1bn of gross unsecured personal loans and £6.7bn of deposits on to its balance sheet. Tesco Bank’s adjusted operating profits of £85m are equal to 1pc of Barclays’ annual profits. Barclays will also pay £50m to Tesco to use its brand on white-label credit cards distributed through Tesco’s branches.

Tesco follows Sainsbury’s Bank in retrenching from the financial services market. Sainsbury’s Bank said last year it would withdraw from offering new services.

Both supermarkets launched banks in the early 1990s to take advantage of its supermarket network. However, the decline of branch banking removed the strategic advantage that both enjoyed over other financial services brands.

CS Venkatakrishnan, Barclays’ chief executive, is preparing to unveil a new strategy for the bank when he announces annual results on Feb 20.