We will never solve the climate crisis if we continue to make it worse. Limiting global warming to 1.5°C means immediately stopping support for oil and gas expansion, both conventional and unconventional. As French NGOs and regulators call for robust oil and gas policies, last month’s Climate Finance Day in Paris drew a line between those who are beginning to turn their backs on oil and gas, and those who are not – the key players int he Paris financial center and the government. Financiers needs to pick a side: protect the future of oil and gas, or protect the future of the planet.

Ahead of Climate Finance Day, the ACPR (French Prudential Supervision and Resolution Authority) and the AMF (French financial market regulator) called the French financial centre to order. In their report assessing the climate commitments of the financial sector, the regulators note an increase in support for hydrocarbons since theParis climate agreement in 2015 and highlight the inadequacies of existing policies on fossil fuels. They call on French financial players to be clear and consistent and ask them to:

• Set up robust policies on all fossil fuels, including conventional oil and gas.
• Clarify the approach to financial services in new oil and gas development projects, in line with the recent findings of the International Energy Agency.
• Adopt a common definition of “unconventional” hydrocarbons, for example the one recommended by the Scientific Committee of the Sustainable Finance Observatory.
• Adopt a “clear policy” and a timeline for the gradual phase-out of unconventional hydrocarbons.

Instead of heeding the ACPR and AMF reports, the scientific committee of the Sustainable Finance Observatory and the International Energy Agency and demanding more robust oil and gas policies from the French financial centre, Minister Bruno Le Maire ignored the expansion of fossil fuels and the phase-out from non-conventional hydrocarbons that he called for a year ago. Instead, the Minister called on financial players to set targets for reducing the carbon intensity of their investments by 2022 in line with the Paris Agreement. He entrusted Yves Perrier – former CEO of Amundi and now Chairman of the Board of Directors – with the task of preparing this early next year.

This new call-to-arms seems more like a diversion strategy more than anything else. It allows the Minister to avoid addressing the inadequacy of the fossil fuel policies of the French financial majors and to postpone the discussion on a more global approach which, although theoretically relevant, will at best not have any impact for several years. It also risks duplicating the work of numerous international initiatives working on strategies for alignment with the Paris Agreement or carbon neutrality pathways. One thing is certain: lowering carbon intensity does not necessarily imply an end to support for companies developing new oil and gas projects, especially in the short term. The International Energy Agency’s order is clear: no more investment in new oil and gas projects.

Countering oil and gas expansion and unconventional hydrocarbons means challenging the majors of the oil and gas industry, since they are among the main developers of unconventional hydrocarbons: according to the Global Oil and Gas Exit List, these account for more than 30% of the oil and gas volumes currently being developed by TotalEnergies, Eni and Shell, more than 45% for Equinor, more than 50% for BP, and nearly 70% for Repsol. There is a growing divide between those who are no longer afraid to exclude the oil and gas titans, those who are still playing both sides , and those who want to maintain the status quo at all costs.

The status quo category features the four biggest French banks, which excel at making marginal improvements to their existing policies. In recent months, the four banks have announced targets to reduce their oil and gas financing, but these commitments still do not address the top priority: halting oil and gas expansion. BNP Paribas, Société Générale, Crédit Agricole and BPCE-Natixis can continue to support and even increase their support for developers of new oil and gas projects, including in non-conventional hydrocarbons and despite the adoption of (flawed) exclusionary policies. This is the case, for example, for BNP Paribas, which has tripled its support for shale oil and gas between 2019 and 2020, despite its exclusionary policy.

It will be difficult to tip the scales as long as the French Banking Federation (FBF) chooses to lower ambitions instead of driving change in the banking sector. The “announcement”, communicated the week before Climate Finance Day, summarised policies already in application by French banks. The FBF pledge did nothing to stop oil and gas expansion, even in the sub-sectors mentioned in the declaration: tar sands and shale oil and gas.

Like banks, many investors have become professional contortionists to reduce their support for oil and gas while sparing their favourite clients. ODDO’s policy on non-conventional hydrocarbons seems tailor-made to avoid having to exclude TotalEnergies because of its Arctic projects (1). To add insult to injury, a few days after the publication of its policy, ODDO added the major – the 4th largest oil and gas developer in the Arctic – to its list of “conviction” stocks recommended to investors. Amundi, with more than $1 trillion under management, has just announced that it will divest from companies for which unconventional hydrocarbons represent more than 30% of their business. This important milestone will not prevent Amundi from being one of the main supporters of TotalEnergies, despite its projects being incompatible with achieving carbon neutrality by 2050.

This is not surprising, as many investors are convinced that TotalEnergies is in the midst of a transformation and shifting to green. But despite a stated ambition to achieve carbon neutrality, TotalEnergies is currently planning a 35% increase in gas production between 2019 and 2030 and plans to continue to open up new gas and oil fields, both conventional and unconventional. By 2030, hydrocarbons will still account for 80% of its capital expenditure. So no, TotalEnergies and the European oil and gas industry are not “transitioning” right now.

As long as financial players try to have it both ways, they will be writing blank checks for oil and gas expansion, including in unconventional hydrocarbons. But could dividing lines be shifting?

La Banque Postale made an unprecedented commitment by ending any support to oil and gas expansion and announcing its total and rapid phase-out from oil and gas. In doing so, La Banque Postale sparked a shift. On the morning of Climate Finance Day, France’s 5th largest bank, Crédit Mutuel, joined the movement: the bank announced an end to all support for new oil and gas projects and threatened to exclude “after a short time” companies that do not give up on their expansion plans. A few days before Climate Finance Day, Ircantec and MAIF also announced their intention to stop investing in companies developing new oil and gas projects. By announcing the exclusion, from the end of 2022, of all companies that do not give up their expansion projects in non-conventional oil and gas, including the majors, Ircantec has broken a historic taboo in the world of investors

On the sidelines of Climate Finance Day, the Caisse des Dépôts et Consignations (CDC) announced that by 2022 it would exclude several European and non-European companies from the oil and gas sector. CDC also clarified its shareholder engagement policy for oil and gas companies that would remain in CDC’s portfolio in 2022. The investor made public the list of criteria that these companies will be assessed against, and announced that it will engage these companies on their strategy to align with a 1.5°C scenario and “its consequences for the development of new exploration and exploitation projects”. The CDC must now go even further and make oil and gas expansion an explicit reason for exclusion: by backing up its commitment policy with a clear timetable for divestment for companies that persist in developing more hydrocarbons instead of reducing their production. This is the policy standard that any investor seriously committed to the climate should be following (2).

This is also the thrust of the guidelines of the French Asset Management Association (AFG), which calls on its members to “gradually complete this dialogue with the implementation of strategies to exclude companies that are totally or partially exposed to certain fossil fuels, particularly non-conventional fossil fuels”. The French Insurance Federation (FFA) also encourages its members “to define their policies for dialogue with companies in the fossil fuel sector, including timetables for halting the financing of companies that do not give up their new non-conventional fossil fuel production projects”.

Limiting global warming to 1.5°C means ending all support for oil and gas expansion from 2021, whether conventional or unconventional. “Stop the expansion of fossil fuels” was the core of the message carried yesterday by activists from Friends of the Earth and Alternatiba Paris who came to sound the alarm at Climate Finance Day. As long as financial and political decision-makers don’t adequately tackle the climate crisis and take on their full responsibility, these calls will only get louder and stronger.

Read more

• Why and how to stop oil and gas expansion in the Arctic
• What does the IEA net zero scenario mean for fossile fuel expansion