BNP Paribas ceases underwriting of coal and gas bonds
French lender BNP Paribas has effectively ceased to participate in the issuance of bonds by the oil and gas sector, the bank confirmed at its AGM this week, in one of the most drastic pushbacks to fossil fuel lending so far
BNP Paribas confirmed that it had changed course in response to investor questions at its AGM this week. The Bank's CEO, Jean-Laurent Bonnafé had earlier this month confirmed this change of course in a hearing at the French Senate.
Whilst progressively scaling down its loans to the fossil fuel industry, the bank plans to expand its lending activities to so called "low carbon industries" with 90% of its lending activities to benefit so called "low carbon sectors" as Yannick Jung, head of corporate and institutional banking for BNP explained to the French senate.
Bonds play a key role in the financing of the fossil fuel industry. Since the signing of the Paris Agreement, banks have helped with the issuance of more than £1trn in loans to oil and gas companies.
Meanwhile, only 30 of the world’s 100 top carbon emitters are listed on stock exchanges with bonds acting as crucial source of funding, as Josephine Richardson, head of research and managing director at the Anthropocene Fixed Income Institute stressed in a recent NZI Podcast.
BNP Paribas’ commitment could send an important signal to other lenders such as Barclays, which has recently agreed to cease loans to new oil and gas projects but has not yet ruled out the funding of ongoing projects.
Moreover, BNP Paribas has so far been one of the key lenders to the industry. According to Reclaim Finance, Barclays had acted as the leading financier of BP, Shell and Total as well as the second largest lender to Chevron and the third-largest lender of Eni for the past four years.
Lucie Pinson, director of Reclaim Finance broadly welcomed the decision but warned that more progress was needed: “We can only welcome the transformation underway within BNP Paribas and note how this sets them apart from other international banks such as Crédit Agricole, HSBC and Barclays.”
But Wilson also stressed that words now needed to be turned into action: “..it should be noted that this is not a firm commitment to no longer provide this type of support, and that the bank has left the door open to other types of financing, such as loans, which could also contribute to the expansion of fossil fuels. After several months of not supporting major oil and gas companies, BNP Paribas provided a loan to Italian oil major Eni in December. This just goes to show that BNP Paribas still has some way to go before it fully implements its climate commitments” she warned.
This sentiment is also echoed by Josephine Richardson: “It is positive to see banks applying sustainability policies to bond underwriting services, which can sometimes slip through the cracks when considering only lending activity.
But she warned that the bank still still participates in mid- and downstream as well as oil-services sector bond issuance. “We support a broadening of the policy to include such activities” she stressed.
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