The Inflation Reduction Act is starting to change the way bankers view their climate targets.
Barclays Plc, one of Europe’s biggest coal financiers, said its analysis of the IRA has led it to commit to wind down its funding for coal in the US five years earlier than planned. Chief Executive Officer C.S. Venkatakrishnan told shareholders recently that the bank now expects to phase out its financing of thermal coal power in the US by 2030.
It’s a move that may well spread across more of the finance industry as executives digest the full effect of the IRA, according to sustainable investing veterans. The bill makes it “much easier for those in the finance sector to take a view on what can be backed and what can be profitable,” said Ian Simm, founder and CEO of sustainable investment firm Impax Asset Management.
Signed into law by President Joe Biden in August, the IRA includes $374 billion that’s earmarked to speed up the transition to clean energy, get more people to buy electric cars, and turbo-charge green technology. The effect will be to bring down the cost of capital for renewable power generation, and ultimately make the sector cheaper and more attractive than fossil fuels, Simm said.
Barclays’ decision to adjust its coal targets is a sign that climate legislation has the power to prevail in steering capital, despite efforts by the Republican Party to penalize firms seen as hostile toward the fossil-fuel industry.