NatWest Eases Fossil Fuel Lending Restrictions Amid Energy Transition Debate

NatWest has softened parts of its fossil fuel lending policy, becoming the latest major bank to recalibrate its approach to financing oil and gas companies as governments balance climate targets with energy security concerns. The changes were announced alongside the bank’s full year financial results and have already drawn criticism from climate campaigners.

The UK based lender said it had removed several restrictions relating to oil and gas financing. These include previous bans on renewing or refinancing reserve based lending for companies involved in exploration, extraction and production. The bank has also lifted limits on offering reserve based lending to new oil and gas customers.

In addition, NatWest has removed a prohibition on working with major oil and gas companies that do not have transition plans aligned with global climate goals. Another restriction affecting upstream companies with most of their assets located outside the UK has also been dropped.

The bank said the decision followed an internal energy system review that reflected the complexity of the economic transition and the broader direction of national policy. Kirsty Britz, NatWest’s head of group sustainability, said the review took into account evolving government priorities and the need to support a secure and orderly transition.

The move places NatWest among a growing number of financial institutions reassessing strict fossil fuel policies. In recent years, banks have faced mounting pressure from investors and regulators to align lending practices with international climate commitments. At the same time, geopolitical instability and supply disruptions have renewed focus on ensuring reliable energy supplies in the near term.

Climate advocacy group ShareAction responded by urging investors to oppose the re election of NatWest’s chair at the upcoming annual general meeting. The organisation argues that easing restrictions on fossil fuel financing undermines climate progress and weakens the credibility of banks’ net zero commitments.

The debate highlights tensions within the financial sector over how to manage the shift to a lower carbon economy. While many banks have pledged to reduce exposure to high emission industries, they also play a key role in financing existing energy infrastructure that supports economic activity.

Reserve based lending, a common financing structure in the oil and gas sector, uses the value of proven reserves as collateral. By reopening this channel more broadly, NatWest signals a willingness to continue supporting parts of the industry during what it describes as a complex transition period.

The policy adjustments come as the UK and other countries grapple with meeting emissions reduction targets while maintaining stable energy markets. Analysts say banks are increasingly navigating competing expectations from shareholders, governments and civil society.

NatWest’s revised stance is likely to intensify scrutiny of how financial institutions define and implement their climate strategies, particularly as investors prepare for the bank’s annual meeting and assess the long term implications of its updated lending framework.