Campaigners are calling on Barclays to close what they see as a “loophole” in its energy policy that allows the financing of fracking companies.

The UK’s biggest bank amended its climate change statement in February, pledging to focus capital on supporting energy companies to decarbonise.

The bank said it would no longer finance new oil and gas projects and would restrict its financing of “pureplay” companies – those that focus exclusively on fossil fuel extraction and exploration.

But ShareAction, which campaigns for responsible investment, pointed out that pureplay companies working on short-term extraction projects are exempted from this commitment.

The charity added that fracking activities – a controversial process that involves making large cracks in underground rocks to extract oil and gas – are typically short-term.

To explore the potential impact of continued financing to fracking firms, ShareAction looked at Barclays’ recent history of energy financing.

Its financing of pureplay firms decreased by 42% from an average of 1.9 billion dollars between 2016-2020 to 1.1 billion dollars between 2021-2022 – the latest year for which figures are available.

But ShareAction also found that companies specialising in fracking on average made up the majority share of Barclays’ financing to pureplay firms during this period, at 57%.

The share was 80% for fracking firms in the most recent year of 2022, it added.

A sign for a Barclays bank
Barclays argues that the financing of fracking does not lock in long-term emissions since most projects have a short-term lifecycle (Tim Goode/PA)

Elsewhere, ShareAction said Barclays has committed to restrict fracking financing in the UK and Europe, where the practice is mostly banned or suspended.

Meanwhile, the bank’s fracking client base is largely located in the US.

The charity said many of Barclays’ peers such as HSBC and BNP Paribas have applied restrictions to financing for fracking in North America as well as the UK and Europe.

Barclays argues that the financing of fracking does not lock in long-term emissions since most projects have a short-term lifecycle and that more widely, investment is needed to support existing energy assets while clean energy is scaled.

The bank’s energy policy update came after a period of engagement with a coalition of investors including ShareAction.

The charity and other campaign groups welcomed the move and withdrew a resolution asking shareholders to vote for change at the bank’s annual general meeting in May.

But they also said the changes did not go far enough to a make significant impact on the bank’s fossil fuel financing.

Kelly Shields, campaign manager at ShareAction, said: “Barclays’ energy policy contains loopholes that allow the bank to continue to financially support fracking – a risky activity that contributes to climate change and can destroy habitats and contaminate water supplies.

“Barclays’ stance on fracking leaves it out of step with other large banks that have listened to the concerns of investors and customers and started taking steps to cut off support for this fossil fuel.

“We’re calling on Barclays’ shareholders to ask the bank to close these loopholes and rule out financing for all pureplay oil and gas companies, including fracking clients, wherever they are in the world.”

Katharina Lindmeier, senior responsible investment manager at Nest, said: “We have been clear that we think Barclays can and should go further on their climate commitments, particularly in strengthening its fracking policy.

“We will continue working with Barclays over the coming years to help develop their policy, with fracking a key area of engagement.”

A Barclays spokesperson said: “With a target to provide one trillion dollars of Sustainable and Transition Finance by 2030, Barclays continues to support an energy sector in transition, focusing on the diversified energy companies investing in low-carbon and with greater scrutiny on those engaged in developing new oil and gas projects.

“We are committed to financing current energy needs, while financing the scaling of the clean energy system of tomorrow, to ensure that energy is secure, affordable and reliable.

“Barclays’ absolute financed emissions for the Energy sector reduced by 44% since 2020, exceeding our 2030 target.”