By Wolfgang Kuhn, Director of Financial Sector Strategies, ShareAction
Together with over 100 of Barclays’ investors, ShareAction has filed the first ever climate-related shareholder resolution at a European bank.
This is significant.
Why? Because banks are the laggards on climate action.
It’s 2020. Last year saw record high emissions, and this year is expected to follow suit. This is at a time when the science warns us the next decade is critical in bending the emissions curve and delivering a low-carbon transition.
Such a transition will cost trillions. Banks have a vital role to play in financing it, and are at huge risk if they don’t.
Yet they still pump billions of dollars into the companies at the forefront of the climate crisis. Since the Paris Agreement was signed in December 2015, 33 of theworld’s largest banks have invested some US$1.9 trillion into fossil fuel companies. Much of that investment is at risk of becoming worthless.
Barclays alone was responsible for US$85 billion of this funding.
That makes it the sixth largest backer of fossil fuels in the world, and the worst climate offender in Europe - exceeding its peers to the tune of US$27 billion.
Meanwhile, Barclays' funding runs broad and deep, with billions going into controversial, high-carbon sources such as Arctic oil and tar sands.
This landmark resolution requests Barclays to bring its energy financing in line with the goals of the Paris Agreement.
It calls on it to publish a plan to phase out the provision of financial services – including project finance, corporate finance, and underwriting – to companies in the energy sector, as well to gas and electric utilities that are not aligned with the climate accord.
The proposal also encourages Barclays to consider the social dimension of the transition to a resilient and low-carbon economy. This makes it the first climate change resolution to include a so-called ‘just transition’ ask in its supporting statement.
Importantly, it is really in the interest of the bank and its shareholders to adopt the asks of the resolution. This resolution represents a significant opportunity for Barclays to bring its lending practices in line with global climate ambition.
It will be voted on by investors at Barclays' AGM in May 2020, and many institutional investors are calling on the company’s board to recommend a vote in favour.
The need for investor support
When looking for co-filers for the resolution, some investors we asked felt they could not support us, because they believed that co-filing such a resolution clashed with their own engagement process.
We are excited to see investors of all shapes and sizes looking to positively and forcefully engage with Barclays through properly established escalating processes for engagement.
But such processes should not be used as an argument against filing of or voting for resolutions. Shareholder voting is an essential step of forceful engagement. But it can serve other purposes too, and so should not be confined to a sequential engagement process.
It’s 2020, not 1980, and the way business is conducted in aggregate is in no way, shape or form compatible with a half-decent future for any of us.
As such, we believe that shareholder resolutions focused on systemic issues such as climate change and biodiversity – as well as the rights and health of our societies – should be seen as great opportunities and supported as a rule. And we welcome the support for this resolution from the 11 institutional investors - including Brunel Pension Partnership, LGPS Central, Sarasin & Partners and Folksam Investors - who co-filed it with us.
Even where an investor may not agree with every word, even if the themes addressed are slightly different to its own priorities, we believe that lending support to or voting for a resolution is not micro-management, and is not incompatible with other forms of engagement.
Rather, it is re-focusing the minds of management on the big picture, in a very pragmatic fashion: If you, management, don’t have a plan yet for the challenges of the 2020s, then we, the shareholders, will direct you to make one.
As such, whether an investor has engaged with Barclays before or not, we hope you will vote for this resolution.
It’s 2020. Time is running out and we must all wield the power at our disposal to build a better, more prosperous future for all.