With $41 billion of fossil fuel financing in 2020, BNP Paribas is, globally, the bank to have most increased its support for fossil fuels in absolute terms between 2019 and 2020. Despite having more ambitious sectoral policies than its peers, in 2020 BNP Paribas was the largest European financier of the fossil fuel industry and the 4th largest worldwide, with significant and growing support for the oil and gas majors. BNP Paribas reacted in a letter to Reclaim Finance and the other five partner organisations behind the report. Since they used those same arguments in their press responses, and have also shared the letter with the media, we are responding here to those arguments
Exceptional support in a time of crisis?
The first argument made by BNP Paribas is that their support for the oil and gas sector in 2020 was an exceptional response to the Covid crisis.
- However, last year’s increase in financing fossil fuels only confirms an upward trend that was already notable in 2019. The bank increased its financing to fossil fuels by 75% between 2018 and 2019, prior to the 41% increase observed from 2019 to 2020.
- If the 2020 rise was due solely to the Covid crisis, the same should have been observed internationally for all banks, given the global impact of the pandemic on the world economy. This is not at all the case, with significant drops observed among major international banks such as Natixis (-18%), Bank of America (-12%), Bank of China (-7%), Barclays (-9%) and Deutsche Bank (-18%). It should be noted that in total, financing from the major banks to fossil fuels fell by 9% in 2020 compared to 2019.
- BNP Paribas’ outsize support for oil and gas majors did not start in 2020: the French bank is the second largest financier of Total over the entire period covered by the report, from 2016 to 2020, but also, and importantly, the largest financier over this period of BP, Shell, and Eni.
Did the companies being financed make a ‘critical shift’ in 2020?
BNP Paribas then argues that most of its financing granted to the oil and gas sector has been directed to companies which made a “critical shift” in 2020 in relation to the energy transition.
- The reality is quite different, and numerous analyses demonstrate that even European oil and gas majors, such as Total, Shell or Eni, whose publicity stunts have proliferated in recent months, are still a long way away from doing what is necessary to deal with the climate emergency.
- The most recent analysis comes from BNP Paribas itself, through its asset management subsidiary, BNP Paribas Asset Management. Alongside with more than 500 other investors, this subsidiary is a member of the Climate Action 100+ coalition, which has published an analysis of the climate strategies of the largest emitters on the planet, including the European majors. The findings are clear: none of these companies meets even the minimum requirements for a credible strategy.
- All majors are continuing to plan new fossil fuel projects around the world, even in the worst sectors, such as the Arctic, or shale oil and gas, and all continue to direct the overwhelming majority of their investments towards fossil fuels. This is exactly the opposite of what climate science and the United Nations are telling us to do, which is to cut oil and gas production by 3% and 4% every year until 2030.
Banks often emphasize the argument that excluding the biggest polluters is pointless because if they do not finance them, others will. However, the financial data show that it was above all BNP Paribas that financed the European majors in 2020, while other major banks, such as the US banks, were reducing their financing – a point made by BNP Paribas itself. The bank was therefore in a position to make its financing conditional on real climate commitments from these companies, starting with an immediate halt to the expansion of the sector. In truth, BNP Paribas has already passed up opportunities to do this, as it did last year when the bank did not support a resolution from shareholders of Total to this effect.
Strict sectoral policies?
Another argument made by BNP Paribas is that its sectoral policies have evolved and have in fact been continuously strengthened since 2011.
- BNP Paribas did indeed improve its policies on the fossil fuel sector, coming in second-best place in the report behind UniCredit, and first in the oil and gas sectors.
- But while these policies have led to a drastic reduction in its financing of companies specializing in unconventional fossil fuels, the financial data published in the report show that these policies have had little to no impact on the sector’s majors. The oil and gas majors are sometimes among the largest operators in these sectors and are even planning further expansion. But they are so diversified that the share of their activity in these sectors remains below the exclusion thresholds adopted by BNP Paribas.
- Although its policies on unconventional oil and gas are better on paper than those of other banks, BNP Paribas will not adequately respond to the climate emergency if it pairs the end of its support for specialised companies with more financing to oil and gas majors.
- For example, what is the point of adopting a policy on shale oil and gas, as BNP Paribas has done, if it is to then go off and increase its financing to this sector more than any other bank, in absolute terms, between 2019 and 2020? This is exactly what BNP Paribas did, with $13 billion of fossil fuel financing in 2020 to BP and Chevron, even though they are among the biggest players in the sector.
A financed power mix which is less carbon intensive than the global average
As on many occasions in the past and in its annual publications, BNP Paribas points out that its financed power mix is less carbon intensive than the global average.
- This type of comparison is at best clumsy, at worst misleading. BNP Paribas does not operate in the same way in all countries worldwide and is therefore naturally dependent on the energy choices made by the governments of countries where the bank is most active.
- Thus, the choice of nuclear power by France and by a major historical client of the bank such as EDF necessarily has an impact on the financed electricity mix. This is not due to BNP Paribas’ political choices, but to a historical legacy.
Alignment with the Paris Agreement’s objectives?
Eventually, BNP Paribas indicates at the end of its letter that the bank is in the process of implementing the PACTA methodology for the oil and gas sectors, which measures the alignment of companies and sectors with the climate objectives of the Paris Agreement.
The use of this methodology and approach is welcome, but it should not be used as a smokescreen to delay measures requiring immediate implementation, starting with the conditioning of support for the sector’s supermajors on the immediate halting of the sector’s expansion.
Thibaut Ghirardi, Senior Manager, Finance ClimAct adds: “PACTA measures the alignment of the companies you finance with climate scenarios. Under these scenarios fossil fuel production needs to decline. In order for your financial exposures to fossil fuel companies to be aligned with the Paris agreement, these companies must be declining fossil fuel production and switching their business models. PACTA is a methodology, how banks use the PACTA results (ie divestment or engagement) is up to them. We hope banks use PACTA to actively align their portfolios with the Paris Agreement, and to take meaningful climate actions which is a priority for 2DII France.”