Following the publication of its new policy, the Banque de France, when asked by Reclaim Finance, clarified that :

  • Its exclusion threshold for unconventional hydrocarbons applies to the exploration and exploitation of hydrocarbons.
  • Opposition to any new fossil project has been included in the voting policy and – in the absence of a specific resolution – will result in a vote against the approval of the company’s accounts.

Monday 18 January 2021 – The French central bank – Banque de France – just published a new policy drastically reducing its investments in the fossil fuel sector. By doing so, the Banque de France caught up with and went further private financial players, it now plans on exiting coal and excluding oil and gas companies such as Total from its investments by 2024. Reclaim Finance welcomes the bank’s bold step but regrets the absence of strict criteria preventing it from supporting new hydrocarbon projects. Most importantly, it calls on the bank to apply the same level of ambition to the immediate decarbonization of the European Central Bank’s (ECB) monetary policy.

The new policy adopted by the Banque de France is a revision of its responsible investment policy established in 2018 (1). The Banque de France is lowering its exclusion threshold for companies deriving more than 20% of their revenues from coal to 2% today, and to zero in 2024.

By using a single criterion for identifying coal companies, against three for best practices (2), the Banque de France has set itself an honorable objective of exiting the coal sector by 2024 while failing to ensure that it will not support the expansion of the sector between now and then. Indeed, the Global Coal Exit List (3) lists between 67 and 118 companies planning new coal-fired power stations whose revenues from these activities are not indicated or are less than 2%.

Along the same lines, the Banque de France says “it will initiate an exit from unconventional hydrocarbons from 2021”. However, its exclusion of companies whose activities in shale oil and gas, tar sands and/or exploration in the Arctic (4) and deep water represent more than 10% of revenues does not prevent it from investing in companies which develop new projects in this area. Moreover, the bank does not plan to reduce this threshold to 0%.

Particularly important is the fact that only exploration in the Arctic or deep water is covered, and that production activities in these areas are not. Thus, the Bank of France will be able to continue investing in companies such as Total, which is planning four new projects in the Arctic (5).

Though it was spared today, Total should fall firmly under the policy of the Banque de France, as it plans to exclude all companies for whom oil represents more than 10% of turnover or 50% for gas by 2024 (6). ” remarks Lucie Pinson, director of Reclaim Finance. In fact, the Bank of France plans to align its investment policy with the European “Paris Aligned benchmark” (PAB) (7). “But the Banque de France, which claims to oppose any new fossil fuel project, is missing an opportunity to translate this position into firm measures. The bank says it will use its voting policy to follow this objective but does not specify what actions it implies: given that resolutions requiring an end to investments in fossils are not commonplace at AGMs, will the Banque de France commit to vote against Patrick Pouyanné and all the other executive boards of booming oil and gas companies?

As with its entire responsible investment policy, the Banque de France‘s fossil fuel policy applies only to directly managed portfolios, hence around 22 billion euros in assets in 2019. It does not apply to monetary policy portfolios (8) which constitute the bulk of the assets managed by the central bank. The bank had notably purchased 125.7 billion euros of assets from private issuers by end of 2019 by enacting the European quantitative easing policy.

Paul Schreiber, campaigner at Reclaim Finance, concludes: “With this announcement, the Banque de France is catching up with and overtaking private financial players (9) and recognizing the urgency of cutting off financial support for fossil fuels. Now, it must apply this dynamic to its core business, by advocating for the immediate decarbonization of European monetary policy, and not wait another three to five years as recent comments from its governor suggest.”

Contacts presse :

Angus Satow, press officer at Reclaim Finance | angus@reclaimfinance.org , +447847754046

Paul Schreiber, chargé de campagne à Reclaim Finance | paul@reclaimfinance.org | +33 6 89 02 07 88

Lucie Pinson, Director | lucie@reclaimfinance.org | +33 6 79 54 37 15

Notes

Press Release from the Banque de France

  1. The Bank of France adopted a responsible investment policy in 2018. This policy previously contained a single criterion concerning coal: the exclusion of companies where more than 20% of revenues comes from the sector. A report on the application of this policy in 2019 is available here.
  2. Best practices are listed on Reclaim Finance’s Coal Policy Tool.
  3. The Global Coal Exit List (GCEL) is a leading database on the coal industry and is recognized as much by the International Finance Corporation (IFC) of the World Bank, the ACPR and the AMF as well as by financial players such as AXA.
  4. Like several financial actors, does not specify which definition of the Arctic will be used.
  5. Total owns four development projects in the Arctic: Novatek-Yurkharovneftegaz, RU ; Novatek-Tarkosaleneftegaz, RU ; Yamal LNG T4, RU ; Arctic LNG 2 T1-3, RU.
  6. Total anticipates still deriving another 35% of its sales from oil in 2030
  7. A detailed analysis of this benchmark is available here.
  8. The responsible investment policy does not apply to monetary policy portfolios, the management of which depends on the rules defined at the level of the European Central Bank. The Banque de France can however explore its extension to the “ANFA ” portfolio, over which it has greater freedom of action. Above all, monetary policy could be changed following the ongoing strategic review process of the European Central Bank (ECB). More than 166,000 Europeans and numerous NGOs are therefore asking the ECB to exclude fossil fuel companies from its asset purchases and from the list of its collateral. The Banque de France and the ECB published two studies exploring the “greening” of these tools in December 2020. However, strong uncertainties persist both on the content of such measures and on the timetable for their implementation. The Governor of the bank has declared that it could take “three to five years”.
  9. The Banque de France was previously lagging behind French financial players.