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The ESG Phenomenon: Barclays, Transition Finance

Editorial Staff

13 February 2024

has assembled more than 100 bankers to form a “transition finance” team as the UK lender aims to expand the business in new ways without being accused of greenwashing, Bloomberg reports. 

The new team within the corporate and investment banking unit will arrange financial products and deals intended to help clients cut their carbon footprint. It is among the first at a major bank to be handed a definition of so-called transition finance, the report said. 

The term applies to the idea of transforming an asset into being more “green.” However, the term hasn’t yet been defined by regulators, raising the risk that when regulators do set out their definitions, banks will fall on wrong side.

The issue is important because greenwashing – making investments appear more “green” than they really are – has become controversial. 

“There’s a real need to define transition finance,” Daniel Hanna, Barclays’ global head of sustainable finance for its corporate and investment bank, was quoted by the news service as saying.

“An important chunk” of transition finance entails putting carbon-intensive sectors such as oil, gas, aviation and agriculture on the road to net zero greenhouse-gas emissions, Hanna said. “The challenge is to do that in a way that is robust and can withstand scrutiny,” and without raising “concerns that by putting capital to work in some of these hard-to-abate sectors you’re effectively greenwashing.”

The article said that Barclays’ lending to oil and gas made up about 2 per cent of its total loan book and 2.6 per cent of its capital markets’ business, according to its 2022 annual report. It provided $4.9 billion in loans to the fossil fuel industry in 2023, compared with an annual average of $7.2 billion over the preceding seven years, it said, citing Bloomberg data.