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Case Study


Banking on SDG delivery

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Sustainable wealth creation

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Among the many positive impacts that the banking industry can have, we believe it can play a key role in delivering the Sustainable Development Goals (SDGs). In our view, Barclays, a global bank we have engaged for 12 years and which is a holding in our SDG High Yield Credit and other fixed-income portfolios, is particularly well placed to align its operations with the delivery of the SDGs through:

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Inclusive financial and lending products

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Helping to fund decarbonisation efforts in the corporate sector

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By tackling broad corporate-culture weaknesses

From commitment to decarbonisation

Banks can help deliver SDG 13 – Climate Action – by providing funding for the transition to a low-carbon economy. The Paris Agreement, which calls for financial flows to be aligned to low-carbon development in order to help limit global warming to a 2⁰C increase, was publicly endorsed by many banks.

For the banking sector, capital deployment must be based on a precise understanding of the risks and opportunities of the climate transition. We have engaged with Barclays since 2006, and in recent years have intensively worked with the bank on its climate-change strategy, asking it to develop lending policies that reduce its exposure to parts of the energy sector that are not aligned with the goals of the Paris Agreement.

We were encouraged by the bank’s climate-policy announcement ahead of its 2020 annual general meeting, although the bank has not made as much progress as we would like to have seen. Barclays asked its shareholders to vote on its ambition to become a net-zero emissions bank by 2050 and on a commitment to align all of its financing activities to the goals and timelines of the Paris Agreement.1 We were delighted to learn that over 99% of shareholders supported the management’s proposed strategy and ambition. However, as a general rule, we encourage companies to accelerate their net-zero timelines to 2030. This makes climate action an even greater focus for current boards and management teams.

Purposeful finance

Providing socially inclusive, purpose-driven financing is another emerging imperative for banks. By doing this, banks can help deliver SDGs 10, 11 and 17: Reducing Inequality, Creating Sustainable Cities and Communities and Strengthening Partnerships for the Goals.

We see a clear opportunity for Barclays to provide capital that creates positive socioeconomic outcomes. It could do this by financing community and low-carbon infrastructure, modifying buildings to improve their energy efficiency and providing loans or trade finance to support low-carbon initiatives from small-and-medium enterprises.

Barclays also has a focus on making growth “green, sustainable and inclusive”2 and measures the value of its socially inclusive and green finance offerings, which grew by 45% to £7.8bn in 2019. In total, its social and environmental financing portfolio was worth £34.8bn last year.

Barclays’ lines of green, sustainable and inclusive growth

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Source: Barclays as at July 2020.
There is also an opportunity for Barclays to clarify what its commercial strategies involve and to show how it has sought measurable impact. Beyond reporting the volume of purpose-driven financing as a share of its total commercial operations, Barclays could encourage banks to create robust, comparable and transparent standards and benchmarks for these activities.

A level playing field

The legacy of the global financial crisis means that banks now face intense scrutiny over their corporate cultures. This includes how they foster responsible values and behaviours, talent progression and closure of gender pay gaps. By managing these challenges, banks can contribute to the delivery of SDGs 5 and 10, which seek gender equality and reduced inequalities respectively.

We have engaged Barclays on its processes for recruiting, managing and developing employees and its corporate culture ever since the bank was involved in the 2012 LIBOR scandal. As the workforce can represent the largest cost for financial-services firms, Barclays’ ability to engage, retain and improve social outcomes for its employees is crucial to its long-term competitiveness.

In recent years, we have been impressed by the firm’s progress in embedding a values-based culture – for example, through dashboards which monitor cultural attributes across the firm. Going forward, we will continue to push for Barclays to solidify a culture strengthened by responsibility, customer centricity and alignment with all stakeholders.

The SDGs: a framework for industry-wide change

Banks finance the real economy and, as a result, can drive meaningful change by aligning capital provision with sustainability. As a major, global financial-services firm, Barclays has the means to deliver positive impacts that are aligned with the SDGs. The institution has responded positively to our long-running engagement focused on embedding sustainability in its products, services and culture.

This information does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments.
1 ‘Barclays PLC 2020 Annual General Meeting (AGM)’, published by Barclays on 7 May 2020.

2 ‘Making growth “green”, sustainable and inclusive’, published by Barclays. Accessed via the company’s website in July 2020.