The annual climate meeting of the Paris financial market takes place in two days. This event is usually an opportunity for French financial players to walk the talk when it comes to climate change by committing to new measures to exit from fossil fuels in favor of the development of renewable energies. However, there are many doubts about this 2022 edition. The last few months have been marked by the acceleration and intensification of the consequences of climate change, but the biggest players in the market still refuse to take a stand against oil and gas expansion, in line with the recommendations of scientists. On the contrary, the expected announcements, both on the Institute for Sustainable Finance and on the SRI label, could act as a halt to the decarbonization of the Paris financial center. Let’s hope we are wrong. 

The 8th edition of Climate Finance Day is being held as usual a few days before the COP, an opportunity to take the pulse of the climate action of French financial players and for some of them to commit to new measures in favor of the climate and biodiversity.

The absence of most of the Paris Financial Center heavyweights in Thursday’s program suggests that very few significant announcements will be made this year. While Société Générale announced its decarbonization targets, the French Banking Federation tried to green the image of French banks. We decrypt its techniques for manipulating the figures in an article published today.

Certainly, the big names in French finance have no reason to rant about their action on climate. While science and the Race to Zero initiative, of which they are members through their respective carbon neutrality alliances (1), are urging them to end their support for oil and gas expansion, they are all missing in action. So far, only 15 investors have taken action against the development of new oil and gas fields.

Stakeholders engaged against the expansion of oil and gas production

* Exclusion of non-conventionals (as defined in the Global Oil & Gas Exit List).
** Exclusion of all upstream developers except the Climate Action 100+ top 12.
*** Exclusion of all new oil field developers in 2027.
¹Crédit Mutuel Alliance Fédérale engages developers, without committing to exclude them.

In contrast, the major French banking groups, including BNP Paribas, Crédit Agricole and Société Générale, are currently content to adopt decarbonization targets, which alone do not guarantee an end to support for companies that will use the new money to develop new oil and gas projects. Only Crédit Agricole has so far committed to reviewing its oil and gas policy, in line with the recommendations of the Glasgow Financial Alliance for Net Zero (GFANZ) and in order to support a gradual withdrawal from the sector. While this should logically translate into measures against expansion, this statement has yet to be implemented.

As for (re)insurers AXA and SCOR, they are falling behind their Swiss and German peers. While Allianz, Swiss Re, Munich Re and Hannover Re have announced that they will no longer insure new oil and gas projects, AXA and SCOR have committed themselves to stop only oil projects – and this will only be applied for AXA in 2024, with possible exceptions for companies that AXA will consider to be “in transition”, in complete inconsistency with scientific findings.

Climate Finance Day 2022 is being held two years after Bruno Le Maire’s first call to French institutions to adopt a strategy to exit non-conventional oil and gas by 2030. While the call has been heard by 15 financial institutions (2), AXA and SCOR as (re)insurers and the major French banks and their asset management subsidiaries have so far been content with more or less significant measures on a few non-conventional oil and gas sectors.

Worse, some of the center’s major players do not have an oil and gas policy (3). Among them are FRR and ERAFP, which have nevertheless committed to achieving carbon neutrality by 2050.

While it is to be hoped that Bruno Le Maire will finally react by announcing regulatory measures aimed at forcing financial actors to stop supporting expansion, nothing is more uncertain. Indeed, last year he only reiterated his call for unconventional measures and entrusted Yves Perrier, chairman of Amundi and vice-president of Paris Europlace, with writing yet another report on alignment strategies for the financial sector. This same Yves Perrier will be at the podium on Thursday, certainly to describe the contours of the next Institute of Sustainable Finance, decried for being thought of as a replacement for Finance For Tomorrow, judged by the elephants of the Place as too much making on the climate. Beyond the desired ambition, there are questions of governance, including the respective roles of industry and NGOs and the links between the Institute and Paris Europlace.

Bruno Le Maire, who will also speak on Thursday, could be satisfied with welcoming the establishment of the Institute, which will remain within the Paris Europlace, headed by Augustin de Romanet. He should also specify the new terms of the SRI label. Exclusions on coal and non-conventional products are expected, but only the details will allow us to know if the new label will correct the flaws highlighted two years ago in a report by the General Inspection of Finance.

After his unanswered requests over the past two years, will the Minister of Economy and Finance, Bruno Le Maire, be able to seize the opportunity of Climate Finance Day 2022 to force the Paris financial center to finally align itself with a 1.5°C trajectory? To be continued. Reclaim Finance will be present to react to the announcements that will be made on Thursday.

Notes:

1. 1. Many French financial institutions are members of GFANZ alliances: the 6 French banks BNP Paribas, Crédit Agricole, Société Générale, BPCE / Natixis, Crédit Mutuel and La Banque Postale are members of the Net-Zero Banking Alliance (NZBA) and AXA, SCOR but also Crédit Agricole Assurances and Matmut have joined the Net-Zero Insurance Alliance (NZIA) Many asset owners and managers, including AXA, CNP Assurances, Groupama, CDC, Amundi, BNP Paribas AM and AXA IM, have also joined their respective alliances, the Net-Zero Asset Owner Alliance (NZAOA) and the Zero Asset Manager Initiative (NZAM). These coalitions commit their members to align with the criteria set by the United Nations through the Race to Zero initiative, including publishing a transition plan by June 2023 in which they explain how they intend to halve their emissions by 2030, achieve carbon neutrality by 2050, and contribute to the goals of halting fossil fuel expansion and phasing out the sector.
   2. These are the asset owners AEMA – MACIF, AEMA – Abeilles, Covéa, Ircantec, MAIF, SCOR RE and the following asset managers: AG2R La Mondiale, Anaxis, Covéa Finance, Ecofi Investissements, La Financière de l’Echiquier, Ostrum AM, SCOR IP, Sycomore AM.
   3. These include the asset owners Agirc-Arrco, FRR, ERAFP, SMA and the asset managers Carmignac, ComGest, CPR AM, Edmond de Rothschild AM, Meeschaert, Natixis IM.