Barclays has bowed to investor pressure over its climate track record and announced plans to shrink its carbon footprint to net zero by 2050.

The bank, which has its headquarters in London, has pledged to align all of its financing activities with the goals and timelines of the Paris agreement, starting with the energy and power sectors, and to publish “transparent targets” to track its progress.

The proposal will be put to an investor vote at its annual general meeting on 7 May and is part of the response to a separate shareholder resolution urging the bank to phase out all lending and services to energy and fossil fuel companies that fail to align with Paris climate goals.

The campaign group ShareAction – which spearheaded the shareholder vote – said the net zero commitment was a “milestone announcement” for the lender. However, ShareAction is calling on investors to back both resolutions, to ensure the bank actually pulls its services from the largest carbon emitters, rather than just offsetting them with alternative investments or services to other sectors.

Barclays has been the top European financier of fossil fuels in the last four years and is the seventh largest globally, according to a recent report by the Rainforest Action Network. The bank has provided more than $118bn (£95.2bn) worth of financial services to carbon-intensive companies and projects since the Paris agreement was signed in 2016 and was the largest financier of Arctic oil and gas last year.

Natasha Landell-Mills, the head of stewardship at the asset manager Sarasin & Partners, a co-filer of ShareAction’s resolution, said: “The message is powerful: continuing to finance activities that undermine planet stability is not in anyone’s interests – and certainly not shareholders. This is groundbreaking and the board deserves to be commended. Other banks should follow suit.

“What matters now is that the board sets robust nearer-term targets that leave no doubt about its determination to deliver net zero emissions by 2050. Shareholders should underline their support for this by supporting not just Barclays’ resolution but also the shareholder-initiated resolution at Barclays’ forthcoming AGM.”

Barclays is expected to consult with groups including ShareAction before it releases detailed targets by the end of the year and will release its first set of reports on its progress in 2021.

The lender had come under mounting pressure in recent months after a number of high-profile investors publicly backed the ShareAction vote. The resolution – which was filed by a group of investment and pension funds managing more than £130bn of assets – gained the support of the top 25 shareholder Jupiter Asset Management, Europe’s largest asset manager Amundi, the Church of England’s investment arm and Nest – the largest UK pension fund by members.

In an interim update to its climate policy, Barclays said it would restrict financing for companies that benefit from thermal coal activities but would continue funding some companies involved in controversial tar sands projects in Canada that aim to cut their emissions. Barclays will no longer support new Arctic drilling and will not finance fracking in the UK or Europe but will consider other global projects.

Greenpeace UK’s senior climate adviser, Charlie Kronick, criticised the policy, which he said contradicted Barclays climate announcements. “The whole thing stinks of hypocrisy. It’s nothing but an attempt to pull the wool over the eyes of shareholders, who rightly want the bank to end its contribution to catastrophic climate breakdown.

“Barclays remains Europe’s largest financier of these planet-heating industries and refuses to face up to the reality of the climate emergency and their role in fuelling it. Until it realises that getting to net zero means ambitious action to phase out support for all fossil fuels, this newly proposed resolution is absolutely meaningless.”