It is a crisp, two degrees Celsius on the morning that Euromoney sits down with Barclays’ new head of sustainable finance, Daniel Hanna, in London. The frosted windows make it easy to forget that the first of January was the warmest New Year’s Day on record in the UK.
And yet, having flown back from the Swiss Alps the night before, Hanna recalls the absence of snow as one of the most striking things about this year’s World Economic Forum annual meet in Davos.
The last time he attended, in the pre-pandemic era of January 2020, Hanna was global head of sustainable finance at Standard Chartered, where he had spent over 13 years building the bank’s environmental, social and governance strategy from the ground up.
He switched to Barclays in November last year; so Davos was Hanna’s opportunity to lay out his new bank’s sustainability action plan, one that will focus on the growth of low-carbon emitting technologies.
Everyone agrees that we need more green finance, but not everyone agrees on what transition finance should look like
Daniel Hanna, Barclays
“Davos usually has a utopian technology and business consultant feel to it, but on the topic of sustainability, I expected a much more difficult set of conversations,” he says, as we begin to draw conclusions from this year’s Davos. “The level of optimism was striking.”
Considering the anti-ESG backlash that has picked up in the United States and the cost-of-living crisis ravaging most European economies, one would have expected some degree of pessimism.
Yet the event seems to have focused firmly on the positives.
“It’s a very Davos thing to talk about ‘inclusive systematic change’,” says Hanna, adding that conversations focused heavily on the potentially transformative power of US Inflation Reduction Act.
Funnelling more money into new low-carbon tech can only be a good thing, and Hanna is understandably enthusiastic, given the bank’s appetite for the sector.
“I think Barclays is uniquely positioned to accompany our clients on this path to net zero and to help support the creation of the next wave of green jobs and green unicorns,” he declares.
According to Tech Nation’s Climate Tech Report 2022, the number of emerging technology companies tackling the climate crisis has quadrupled globally, raising a record $111 billion in capital investments in 2021.
The UK is second only to the US for the number of climate tech startups and scaleups, it says.
This booming tech ecosystem is where Barclays wants to put its equity capital raising capabilities to work by targeting growth companies through its sustainable impact capital portfolio.
“Barclays committed £500 million of its own balance sheet to these companies; that’s what differentiates us from our peers,” claims Hanna.
The franchise, lead by co-heads of sustainable impact banking Marie Freier and Brian Reilly, focuses on early-stage equity raising for climate tech companies. Freier is based in London and Reilly in the US. Wei Lynn Chen covers Asia.
“A key focus in my last job was: how do we accelerate the electrification and decarbonization of growing economies?” explains Hanna. “My next phase is focused on scaling up and commercialising the new wave of technologies being developed to decarb hard-to-abate sectors.”
It makes sense then, that a lot of the conversations at Davos were about the IRA and how the EU intends to react. The IRA is expected to boost the US green infrastructure environment and attract investors with an appetite for climate tech.
Investment banks will be eager to tap into those US opportunities, leaving a European bloc not known for being nimble to respond.
However, shiny climate-tech transactions won’t eliminate the thorny issue of Barclays tacking its fossil-fuel exposure.
While other large UK players such as Lloyds and HSBC published exclusion policies on upstream funding in 2022, Barclays will continue to be called out for financing hydrocarbons by civil society organizations. Its UK headquarters were sprayed with orange paint by environmental activist group Just Stop Oil in November.
“We do engage with civil society, and they certainly engage with us,” says Hanna.
“While progress has been made, we know that the industry needs to do more, and Barclays needs to do more,” he admits, adding that the war in Ukraine has polarised views on whether energy security and climate agendas are at odds with one another.
“My perspective is that actually the two agendas are aligned for the first time,” Hanna says. “But there is a dispersion of views on what the right reaction is in the short term.”
There is also a common misconception that the sector isn’t aware of the changes that need to happen.
“Oil and gas companies are very aware of what the pressures are and where they are coming from, and so are we,” he says.
But that awareness means very little if it isn’t backed up by capital commitments. Barclays set a new target to facilitate $1 trillion of sustainable and transition financing between 2023 and the end of 2030.
The group had also announced a 40% reduction in absolute CO2e emissions – including methane – in its lending and capital markets activities by 2030, compared with a 2020 baseline, and a phase out from coal by 2030.
“Everyone agrees that we need more green finance, but not everyone agrees on what transition finance should look like,” he says.
For him, increasing carbon prices could motivate companies to become more efficient.