Lloyds Banking Group announced today a new commitment to stop funding new oil and gas projects, becoming the first UK bank to do so.

The new commitment was unveiled in the bank’s updated “External Sector Statements,” which outlines the company’s policies and approaches to various high impact sectors, related to climate change risks, opportunities and risk management. Lloyds is a member of the Net Zero Banking Alliance, a group of banks committed to aligning their lending and investment portfolios with net-zero emissions by 2050.

Under the updated statement, Lloyds pledged that it will no longer support the direct financing of new greenfield oil and gas developments, defined as those that did not receive approval before the end of 2021.

The new commitment aligns with one of the key requirements, according to the International Energy Agency (IEA), necessary to limit the global temperature rise to 1.5 °C. In its landmark May 2021 report, the IEA concluded that a viable net zero pathway exists, but would require a massive global mobilization including trillions of dollars in investment in clean energy development and deployment.

The IEA’s roadmap required an immediate end in investment in new fossil fuel supply projects, as well as no further final investment decisions for new unabated coal plants, and no sales of new internal combustion engine passenger cars by 2035.

Responsible investment NGO ShareAction applauded Lloyds’ new policy, while calling on the bank and its peers to go further on their financed emissions commitments. Jeanne Martin, Head of Banking Programme at ShareAction, said:

“Lloyds Banking Group has today set a new standard for the UK banking industry by committing to stop directly financing new oil and gas fields. We commend the bank for doing so and urge major UK banks such as Barclays and HSBC to swiftly follow suit.

“However, asset-level financing is only a fraction of the financing provided by banks to new oil and gas. Lloyds Banking Group should not rest on its laurels just yet, but instead urgently turn its focus to the companies behind these new oil and gas fields.”

In addition to its oil and gas policy amendment, the updated statement also included a revision of Lloyd’s position on coal, delaying its plan to have no clients who operate UK coal-fired power stations by the end of 2022. The statement explained that the update was made following a request by the UK government to some power generation companies to keep coal-fired power stations available until March 2023, in order to ensure enough electricity supply for the UK this winter.