Barclays has updated the technical eligibility criteria for its sustainable finance and transition finance frameworks to expand the inclusion of nature.
The documents set out the UK banking group’s methodology for classifying finance as “transition” and “sustainable” for the purpose of tracking and disclosing performance against its target of facilitating $1 trillion of sustainable and transition finance by end-2030.
Working with The Biodiversity Consultancy (TBC), Barclays has applied a “leaf label” to activities in both frameworks to denote that they are “nature eligible”. Qualifying activities contribute to at least one target of the Global Biodiversity Framework (GBF) and go beyond “minimum legal requirements for compensation of negative impacts”.
The label has been applied to activities already included in the frameworks, as well as new ones added as part of the work.
“We have observed that client transition plans increasingly include nature considerations alongside climate,” Amit Puri, head of sustainability, business at Barclays, told Responsible Investor.
“We have reflected this market development by expanding the eligible activities within our sustainable and transition finance frameworks to include nature transition and activities that support the Global Biodiversity Framework.”
‘Positive impact pathways’
According to Grant Rudgley, TBC’s head of nature and sustainability for financial institutions, the key principle of the “leaf label” is that every contribution to the GBF will be different, depending on the activity. “We call these their positive impact pathways,” he said.
Some pathways are very direct, such as habitat restoration, while others may be more indirect, such as technologies that enable the reduction of pressures on nature.
This prompted TBC to create three “buckets” of activity that contribute to GBF targets. These include enabling activities, such as technologies to monitor deforestation; reduction activities to ease pressure on nature, such as preventing stormwater, wastewater and agrochemical runoffs; and restoration and conservation.
Activities included in previous versions of Barclays’ frameworks were assessed for their potential contributions to the GBF and mapped to one of the three buckets, drawing on existing nature finance taxonomies and TBC’s experience of working with multinational development banks and standard setters on nature.
Nature additions
Among the new additions to the sustainable finance framework under sustainable food, agriculture and forestry, the update includes agroforestry systems linked to sustainable agricultural practices, and the restoration of natural shoreline protection for preventing coastal erosion and facilitating sediment deposition.
Sustainable transport now includes recovery and recycling of batteries from electric vehicles to reduce resource extraction and environmental impact.
In the transition finance framework, ballast water treatment was added under shipping-specific activities and, under energy-specific activities, the conversion of offshore oil and gas platforms into artificial reefs to help regenerate threatened marine ecosystems and species.
“Approaches like this provide a baseline and can enable banks to track activities and understand where they could be doing more on nature when it comes to different sectors,” Rudgley told RI.
TBC has started to do more work with commercial financial institutions that want to understand what they can and cannot claim as contributing to a nature-positive future, and consequently identify opportunities and count their contributions, he added.
“And this is not only about focusing on the deep green nature finance – for example, the restoration of degraded habitats – but more broadly on the range of activities that can contribute to a nature-positive future.”
Going through these exercises gives financial institutions an opportunity to see what activities contribute to climate and nature goals, “so they are able to have concrete examples of what to finance at the climate-nature nexus”, Rudgley added.