Targeting Barclays, Climate Activists Fight Their Way to Draw
(Bloomberg) -- Few people understand the seeming futility of getting big banks to do the right thing better than Catherine Howarth.
For three years, Barclays Plc, Europe’s biggest financier of corporate carbon emitters, ignored her entreaties. Then her non-profit, ShareAction, spent the best part of another year pushing a shareholder resolution -- the first of its kind in Europe -- for the lender to phase out funding for fossil-fuel companies.
The result: A pledge from Barclays to cut its net emissions to zero in three decades and, in the meantime, to ramp up its green financing activities.
“For the current directors of a company to commit to something that’s 30 years away does leave quite a lot of wiggle room,” the 46-year-old activist says.
It was better than nothing, but far less than Howarth wanted. While Barclays said in March that it planned to adjust its lending and capital markets activities to be compatible with the goals of the Paris climate agreement to limit global warming, the London-based bank didn’t commit to phase out financing to fossil-fuel companies that have no plans to contribute to those targets, the key objective of ShareAction’s resolution
The battle with Barclays, which Howarth insists isn’t over, highlights the gap between rhetoric and reality when good business and good intentions diverge.
“It’s not just a question for Barclays,” she says. “The global banking sector isn’t where we need it to be, and even though it’s moving really quite fast in the right direction, we’re in a climate emergency and so moving quite fast but not fast enough is what could take us over dangerous tipping points.”
The contest between ShareAction, a 55-person charity that until earlier this year was operating out of a re-purposed liquor warehouse on the edge of London’s financial district, and an institution with 80,000-plus employees and around $2 trillion in assets is the classic underdog story – but without the cinematic finale. Instead, it has provided a lesson in the limitations of shareholder activism on climate change.
Since the Paris climate agreement was signed in December 2015, Barclays has helped arrange $91.7 billion of bonds and loans for energy companies, excluding solar, wind and other renewable producers, more than any bank in Europe, according to data compiled by Bloomberg. That includes $20.8 billion in 2020 for clients including BP Plc and Exxon Mobil Corp.
JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. have been the biggest lenders to corporate emitters, while HSBC Holdings Plc and BNP Paribas SA are among Europe’s largest financiers, Bloomberg data show. Since Barclays made its net-zero pledge, London-based HSBC and JPMorgan in New York have made similar commitments.
Barclays Chairman Nigel Higgins said Dec. 3 during a virtual conference hosted by the Financial Times that the company’s fossil-fuels business is commensurate with the scale of its overall investment-banking franchise and there’s no reason to think the bank took clients that its peers turned down. He wrote four days earlier in a letter to shareholders that the bank’s environmental journey “is far from complete’’ and it’s “committed to continuous improvement in our response to the climate challenge.’’
A spokesman for Barclays declined to comment for this story.
Howarth joined ShareAction in 2008 after several years campaigning for a living wage for low-paid workers. She credits her Irish mother for her passion for social justice, and for her thick red hair. For Howarth, the Barclays resolution is “one piece, one really exciting moment, in a much longer drama.”
Just months after the Paris accord was announced, Howarth and a group of colleagues attended the general meetings of Britain’s largest banks to gauge their response. While some banks made board members available for discussion, what followed with Barclays was a series of fruitless meetings with its sustainability team, Howarth said.
Three more years of empty chat resulted in a more aggressive – but still courteous – strategy. It was time to force Barclays’s hand.
Over the din of commuter trains winding into London Bridge station, Howarth and her team weighed the pros and cons of pursuing a resolution that would require Barclays to cease financing fossil-fuel companies that had no plan to reach the Paris agreement. They wanted the lender to set and disclose targets to wind down infrastructure funding, corporate loans and debt underwriting for oil and gas exploration, production, refining, marketing and storage, as well as for coal companies.
Signing up Barclays shareholders took time and effort. But by last Christmas, they reached the threshold of investors required to put a resolution on the agenda for the bank’s annual meeting in May. The supporters included more than 100 individual investors and a dozen institutions, including Brunel Pension Partnership Ltd. and Sarasin & Partners. The Church of England and Jupiter Asset Management also backed the proposal.
After the resolution became public, she finally did get an audience with the bank’s decision makers, including three meetings with Higgins. She declined to comment on the particulars of the discussions, citing confidentially agreements.
Dominic Burke, investment director at Lankelly Chase and part of the group that filed the resolution, attended some of the meetings and said Barclays didn’t engage with the substance of the group’s demands. Though the bank’s team suggested they shared the non-profit’s core concerns about climate change, they took issue with the wording of the resolution that requested a phasing out of fossil-fuel financing, he said. The bank’s alternative gave it more latitude to trumpet its green credentials and continue to finance polluters, Burke said.
While Howarth didn’t get what she wanted — only 24% of shareholders supported ShareAction’s resolution, which was far below the threshold required for Barclays to adopt it — she is playing the long game and considers the resolution to be a successful endeavor.
If her experience of shareholder advocacy teaches her anything, it’s that patience pays. Seven years after ShareAction filed a resolution requesting that Royal Dutch Shell Plc stop investing in carbon-heavy tar sands projects, a proposal that received less than 15% shareholder support, the company said in 2017 it would sell most of its Canadian oil sands assets.
And Barclays has “moved an extraordinary distance in the last 12 months,” Howarth said. At the end of November, the bank said it joined an industry-wide group that measures emissions from lending and underwriting, developed its own methodology for calculating funded emissions, and affirmed its ambition to align its financing with the Paris agreement.
She also thinks she’s figured out the key to success for climate action in the finance industry: appeal to financiers’ animal spirits.
“You’re not going to get these people necessarily to do anything out of the goodness of their hearts, but if you can harness the competitive spirit between them, it can be extraordinarily productive,” Howarth said.
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