Institutional Investors Call for Barclays to End Fossil Fuel Financing

Eleven institutional investors that manage more than £130 billion ($170 billion) worth of assets have filed a shareholder resolution calling for Barclays to set clear targets to phase out services to energy companies that fail to account for Paris climate goals.

The investors urge the bank to develop a plan to gradually stop the provision of financial services, including project finance, corporate finance, and underwriting to companies in the energy sector. They also include gas and electric utilities that are not aligned with the goals of the Paris climate agreement. The resolution is being coordinated by UK charity ShareAction, which claimed it is the first climate change resolution filed at a European bank.

“As systemically important actors, large global banks can influence whether or not the Paris goals are met,” said the resolution. “The sector is therefore expected to ensure that its financing activities are aligned with the Paris goals. This requires a significant shift of capital away from carbon-related assets and towards low-carbon sectors.”

The group cited an April statement by the Bank of England that said that failing to meet the Paris goals could result in the most severe financial risks for the banking sector. It also said that banks will inevitably feel the consequences of events caused by climate change as they are lenders to the entire economy.

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“These events include physical risks, such as flooding, which can impact the value of assets held by banks and increase credit risks,” the statement said.

The investors also said Barlays has fallen behind its peers in accounting for climate change, contending that its European competitors have taken “more ambitious steps to align their energy financing with the Paris goals.”

They said HSBC has committed to not providing project financing or general-purpose lending where the majority of the financing is used for new offshore oil and gas in the Arctic, and new greenfield oil sands projects.

Standard Chartered won’t provide new financial services to new projects or developments that involve the extraction and construction of associated export facilities from tar sands. Standard also includes the exploration or production of oil and gas in the Amazon basin and the exploration or production of oil and gas in the Arctic region. ING committed to reducing its exposure to coal power generation to nearly zero by 2025.

French bank Credit Agricole also has committed to align exposure of its portfolios to the coal industry with a full phase out of coal by 2030 for EU and OECD countries; 2040 for China; and 2050 for the rest of the world. French bank BNP Paribas committed not to provide financial products or services to exploration and production companies that own or operate pipelines or liquid natural gas export terminals supplied with a significant volume of unconventional oil and gas.

“We believe that it is crucial for investors to carry out climate change risk assessments across the whole financial chain,” Laura Chappell, CEO of the £30 billion Brunel Pension Partnership, which is among the 11 investors, said in a statement. “As banks are the biggest lenders, they are a key component of this. The lending practices of many banks pose a serious threat to the goals to the Paris agreement.”

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Tags: Barclays, Brunel Pension Partnership, Fossil Fuels, Laura Chappell, Paris agreement, ShareAction

A lack of internal controls on Arizona’s Public Safety Personnel Retirement System was publicized during a recent revelation brought to the attention of the pension’s board on January 8.

“It appears that some of the previous staff may have failed to adequately communicate information to the Board as it related to the financial books and records of the System as well as the systems to manage and maintain those records,” said the report, authored by the pension’s board.

“The Board was also unaware of what appears to be substantial differences in the internal controls for those records at the system,” the report added.

The lack of internal controls led to overstated employer contributions and understated employee contributions. This was caused in part by large turnover numbers in key positions, a change in financial reporting databased, manual entry of data, and a lack of documented policies and procedures for month-end and year-end closing,

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“These are very troubling issues, and we felt disclosure was needed,” said PSPRS board member Harry Papp, according to Arizona Central.

Other issues included an overstatement of the pension’s net appreciation in fair value and investment expenses, cash and short-term investments being reported as other receivables. There were also investment fees related to the subsequent fiscal year being paid and recorded as investment expenses in the current fiscal year.

The system was recommended to “design and implement effective internal control procedures to ensure the financial statements are free from misstatements and consistent with accounting policies; additionally, the system should allocate the necessary staffing and information technology resources to implement and maintain controls and procedures for month-end and year-end closing,” the report said.

Management of the pension agreed with the recommendations and said they’ve already taken numerous steps to correct those issues. “The staff members that may have been involved with these duties and responsibilities are no longer employed by the system or have been placed on administrative leave,” the board said in a letter.

They’ve also hired a new qualified administrator, realigned the reporting structure, and hired another firm to provide a greater level of review. They established a separate audit committee to “identify and resolve as soon as possible perceived deficiencies with financial record-keeping and internal controls.”

Tags: Accounting, Arizona, audit, Internal Controls, PSPRS, Retirement System