25/04/2024
After issuing a formal notice to BNP Paribas in October 2022 (1), our associations Les Amis de la Terre France, Notre Affaire à Tous and Oxfam France took the bank to court in February 2023 (2) for failure to comply with its duty of vigilance with regard to climate change. This is the first time a bank has been called to court for its contribution to climate change.
Just over a year after our appeal, we’ve made some progress! BNP Paribas has updated its climate policy, but is this enough to claim victory?
In order for the bank to comply with the law on duty of vigilance, we are asking it to urgently cease granting new direct or indirect financial support to the development of oil and gas projects.
The target: companies that develop new fossil fuel projects, such as Saudi Aramco, Total and Shell, among the most aggressive. We call them “developers”. According to the Intergovernmental Panel on Climate Change (IPCC), as well as the International Energy Agency (IEA) and the United Nations, these groups are working dangerously against limiting global warming to 1.5°C and even 2°C, and achieving carbon neutrality by 2050 – objectives which are written in black and white in BNP Paribas’ policies, and which appear so dear to the bank in its communications.
A bank can provide 3 main types of financial support for the development of fossil fuels. This can be directly via project financing. But it can also be via financing to a developer, which the latter can use freely – the financing not being dedicated to a specific project. General financing can take the form of a bond or share issue, or a loan.
In May 2023, BNP Paribas has undertaken to stop all financing of projects “for the development of new oil and gas fields” (3).
We decrypt:
This is a step that should be put into perspective, as such direct financial support represents only 3.6% of BNP’s financing to the fossil fuel sector – in 2022 (4). BNP can therefore continue to support the companies behind these new oil and gas projects. Although this corporate financing is described as indirect, it is by far the main lever for supporting expansion.
Furthermore, BNP Paribas has so far only excluded oil & gas exploration and production projects from its direct financing, but has not committed to the rest of the industry’s value chain. In particular, it can still provide dedicated financing for new liquefied natural gas (LNG) terminals, gas pipelines or oil pipelines linked to “conventional” (5) reserves. Yet these projects play a key role in the sector’s expansion: this is particularly true of new LNG projects, which have no place in the IEA’s 2050 carbon-neutral scenario.
BNP Paribas has stated that it has “not participated in any new bond issues to the oil and gas sector since mid-February 2023” (6). In early February 2023, in fact, the bank had participated in the issue of major bonds for the giants Saudi Aramco and BP – for a total of $4.5 billion and $2.5 billion respectively.
We decrypt:
This is good news! Because bond issues represent an important source of financing leverage, particularly for the major oil and gas majors. And because BNP Paribas makes a major contribution to these transactions: between 2016 and 2022, 37% of the bank’s financing to the fossil fuel industry was linked to bond issues (7).
Unfortunately, by explaining that it has recently stopped participating in a bond issue to the sector, BNP seems to recognize the problem posed by these financial services… but does not commit to renouncing this harmful practice in the future. It is therefore imperative that this very recent observation be translated into a firm and official measure, within a sector-wide policy. This is all the more urgent as this type of financing often involves large sums of money, and can run for years or even decades, engaging BNP Paribas’ accountability in the medium and long term. Furthermore, BNP Paribas has made no announcement about the end of new share issues – even though these represent a much less significant proportion of the bank’s financing to developers.
The question is simple: has BNP stopped granting new loans to companies like Total that are planning new oil and gas projects? This is where BNP Paribas’ communication becomes even more complicated. Where there’s confusion, there’s a wolf. The bank communicates on several elements relating to its lending activities: some relating to its flow of new loans – i.e., new loans issued in a given year – and others to its stock of existing loans – i.e., loans already in progress, but which may date back several years (8).
a. With regard to its credit flow – i.e. the main thing to look at when looking at the bank’s new support for developers – BNP Paribas states that:
“To reduce the “fossil” part of its portfolio, BNP Paribas has significantly reduced its production of new loans to the oil and gas sector in 2023. For example, at the end of 2023, the ratio between financing flows granted by BNP Paribas to players specializing in oil and gas extraction and production and financing flows linked to renewable energy projects stands at 1 in 11.”
We decrypt:
Like the new bond issues, BNP seems to recognize the problem of lending to developers, but does not commit to abandoning this harmful practice in the future. Even though the bank is announcing a reduction in its lending in 2023, it continues to leave the door open to new loans to companies opening up new oil and gas fields. Yet this is a red line if the bank wants to meet the objectives of the Paris Climate Agreement and achieve carbon neutrality by 2050: every new euro granted to a developer is one euro too many.
In December 2023, BNP Paribas contributed to a $3 billion loan for Italian oil and gas major Eni (9). Although this loan, a sustainability linked loan (SLL), is supposed to be linked to the achievement of climate objectives, in particular the development of renewable energies, there is no guarantee that it will be directed towards one of Eni’s renewable energy projects. What’s more, these are cosmetic for Eni: the company invests less than 7 cents in renewables for every euro spent on fossil fuels.
BNP’s current policy stipulates that it will no longer grant loans – once again bypassing bond activities in particular – to private companies exclusively active in oil exploration and production, known as “oil independents” (10). The problem lies in this deliberately limited definition: BNP has set aside a restricted part of the industry, leaving itself the possibility of still supporting many players, described by the bank as “diversified”. These players include the largest oil and gas majors and state-owned enterprises, spearheading the expansion of hydrocarbons and major customers of the bank. Between 2016 and 2022 (11), BNP Paribas ranks as the world’s leading financier of the 9 European and American majors (12).
Finally, the “1 in 11” ratio sounds impressive, but it erases an important part of BNP’s harmful activities: once again, the company only talks about “specialized players”. In other words, it doesn’t apply to all developers, and especially not to oil and gas majors like Total and Eni, or state-owned companies like Saudi Aramco. Yet, as explained above, these companies are among the most problematic in terms of their planned investments in fossil fuels, and in particular in new oil and gas exploration and production projects.
b. With regard to its credit stock – or exposure – BNP Paribas states that:
“Between the end of September 2022 and the end of September 2023, BNP Paribas reduced its stock of fossil fuel credits by 6.4 billion euros, from 23.7 to 17.3 billion euros. The Group aims for its stock of credit exposures to low-carbon energy production to represent 90% of the stock of credit exposures to its energy production, and 10% to fossil fuels by 2030.”
We decrypt:
With this target for reducing its stock of loans to fossil fuels, BNP Paribas seems to recognize the need to move away from oil and gas. But it’s still not enough.
While this commitment is likely to restrict BNP Paribas’ ability to increase new lending to the sector, BNP Paribas is at the same time maintaining new support for companies developing new fossil fuel projects – as evidenced by its December 2023 loan to Eni. The bank could thus decide to favor certain of its clients, despite their expansion plans in the oil and gas sector. This poses serious climate risks: a loan granted today and contributing to the development of a new fossil fuel project will not necessarily be included in the bank’s outstandings in 2030, even if this infrastructure will continue to pollute well beyond 2030.
Finally, let’s point out that the ratio between the stock of credits for low-carbon energy production and the stock of credits for fossil fuels put forward by BNP Paribas is biased and not very usable. Firstly, because the perimeters associated with low-carbon on the one hand, and fossil fuels on the other, make this comparison incoherent. The bank includes in the “low-carbon” category – i.e. in the “green” sectors to be expanded – sectors with questionable ecological impacts, such as nuclear power and biofuels. On the other hand, it excludes entire sectors of industry from “fossil energies”, in particular transport, export (including LNG) and electricity generation (gas and oil-fired power stations).
Finally, let’s not forget that we’re talking here only about loans. By focusing on certain financial services and not others in the calculation of this ratio, BNP deliberately omits bond or share issues, when these modes of financing are preponderant in the fossil fuel sector.
BNP Paribas appears to be changing its practices and policies on fossil fuels. However, this progress remains insufficient and uncertain, both in terms of pace and scope, in the light of its duty of climate vigilance, since it does not guarantee the cessation of all new financial services to companies that develop oil and gas, and thus bet against limiting global warming to 1.5°C. Continuing to support such companies is a negative-sum game, for which BNP Paribas is responsible. This is why Friends of the Earth France, Notre Affaire à Tous and Oxfam France are pursuing their legal action against BNP Paribas.
(1) Les Amis de la Terre France, 2022. French climate NGOs take unprecedented legal action against BNP Paribas, number one European financier of fossil fuel expansion.
(2) The BNP Paribas Case, 2023. The BNP Paribas Case is back: we are officially taking BNP to court!
(3) The BNP Paribas Case, 2023. BNP’s new climate commitments: a lot of noise for very little effect.
(4) Le Monde, 2023. « Bombes carbone » : pourquoi les banques françaises peuvent financer les énergies fossiles malgré leurs engagements climat.
(5) BNP Paribas has adopted restrictions on the financing of certain projects related to non-conventional oil and gas – shale gas, tar sands, extra-heavy crude oil – and from Arctic and Amazonian regions.
(6) BNP Paribas, 2024. Financement de l’énergie : la transformation du business model de BNP Paribas s’accélère, confirmée par différents classements.
(7) The BNP Paribas Case, 2023. New figures: BNP, best friend of fossil fuels.
(8) For example, BNP may have made a 3-year loan to Total in 2022, which will still appear in its stock at the end of 2023.
(9) Reclaim Finance, 2024. Twitter post.
(10) BNP Paribas, 2023. Oil and gas policy
(11) The BNP Paribas Case, 2023. New figures: BNP, best friend of fossil fuels.
(12) BP, Chevron, ConocoPhillips, Equinor, Eni, Exxon, Repsol, Shell and Total.
Marion Cubizolles
Friends of the Earth France
marion.cubizolles@amisdelaterre.org +33 (0)6 86 41 53 43
