Since the UN Sustainable Development Goals (SDG) came into action in 2016, banks have given increasing increasing attention to environmental, social and governance (ESG) measures. In light of the Covid-19 pandemic, this may now be more important than ever. Lucy Dyer explores the strategies of France’s four largest retail banks
Ranked first in the 2020 YTD Green Bond Ranking, BNP Paribas is looking to become ‘greener’. Laurence Pessez, global head of CSR at BNP Paribas, tells RBI: “Our mission, which we formalised at the beginning of the year, is to contribute to responsible and sustainable growth and to aim at being a leader in sustainable finance. I think we already are, but the fact it’s embedded in our purpose is very important.”
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Ecological actions seem consistent with this purpose. After ceasing dealings with shale gas and tar sands companies in 2017, the bank set a target in 2019 of having all electricityproducing EU customers stop using coal by 2030. In May this year, it announced the expansion of its coal exit policy to include all OECD countries. As of the end of 2019, BNP Paribas has also raised €15.9bn ($18.5bn) to finance renewable energy, with a new target of €18bn by the end of 2021.
The bank is also a founding signatory of the United Nations Environment Programme Finance Initiative (UNEP FI)’s Principles for Responsible Banking (PRB). “In my opinion it’s a major transforming tool,” says Pessez. “All of these banks are aligning with the Paris Agreement to contribute to achieving the SDG and having a real impact on society.”
It seems Covid-19 has, if anything, accelerated BNP Paribas’ ESG strategy. The bank has been involved in over $59bn worth of Covid-19-related sustainable and social bond issuances worldwide. Mid-lockdown, it also launched a staff training course on sustainability, climate change and financial inclusion, completed by 10,000 employees.
Société Générale
Société Générale, ranked sixth in Europe on ESG criteria by RobecoSAM in 2019, has committed to several environmental objectives. It is raising its focus on replacing fossil fuels, evidenced by a 2019 pledge to withdraw from the thermal coal sector. Other commitments include signing both UNEP FI’S PRB and the Responsible Digital Charter, aiming to optimise digital practices together with respecting ethics and the environment.
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By GlobalDataSociété Générale has already seen tangible results from past eco-conscious initiatives. As of the second quarter of 2019, the bank had raised 89% of its €100bn target for 2016-20 to fund renewable energy. Its efforts are also paying off in terms of international rankings. In 2019, RobecoSAM awarded the bank first place out of 175 for environmental measures, and Infranews has also ranked Société Générale first for financing renewables in the EMEA region.
Crédit Agricole
In 2019, Crédit Agricole announced its new Group Climate Strategy. The bank plans to create a societal engagement committee, including executive managers, a scientific committee and an information system to advise the group on climate strategy choices.
Crédit Agricole also plans to implement a “transition scoring” system for customers, assessing their contribution and ability to adapt their models to energy transition.
Another goal is to create a support mechanism for start-ups and SMEs innovating in the environmental field. The group has established a fund seeking to raise €200m for the energy transition, agriculture and agri-food systems. Along with encouraging innovation in this sector, the bank aims to finance one in three renewable energy projects in France. With support for renewable energy also comes a phasing out of thermal coal.
Crédit Agricole plans to cease new relationships with corporations generating more than 25% of their turnover from thermal coal, and stop working with corporations developing new thermal coal capacities. This should encourage companies and customers to support more environmentally conscious initiatives.
BPCE Groupe
BPCE is also working to implement ESG criteria, adhering to the PRB.
ESG measures are particularly evident at BPCE subsidiary Natixis, which has introduced the Green Weighting Factor to evaluate the climate impact of each financing deal before carrying it out. It gives each transaction a rating on a seven-colour scale from dark brown to dark green, where green is more environmentally friendly.
The new approach is coupled with Natixis’s 2020 announcement that it will stop financing projects and companies actively involved in shale oil and gas exploration and production. After decreasing support for companies reliant on thermal coal since 2015, it has also pledged to completely leave the coal sector by 2030 for European countries and 2040 for the rest of the world.
It seems the pandemic has gone some way to encourage the bank to rethink its sustainability measures. Natixis CEO François Riahi says: “The current Covid-19related crisis should be an opportunity to step up the energy transition in order to limit global warming.”
Looking ahead
Overall, these four major French banks seem to be embedding the environmental side of ESG into their strategies well. Particularly in the last five years, they have made significant changes to their policies for a more sustainable future – all focusing on funding renewable projects through ‘green’ bonds, withdrawing from the coal sector and ultimately aligning with the Paris Agreement.
It will be interesting seeing how and when each bank will meet its objectives. With the current pandemic showing just how adaptable they can be, banks can use this skill to help tackle the sustainability crisis head on.
