The Institut Louis Bachelier defines the methodology for the energy financing ratio

The decarbonization of the power sector relies on a dual dynamic from banks: reducing financial support for fossil fuels and providing massive support for sustainable alternatives to replace them. The energy financing ratio, which captures these two trends through a single metric, is increasingly cited within the financial sphere, including by regulators. It is now the Institut Louis Bachelier (ILB) that is contributing to the discussion: a recently published article [1] provides an in-depth analysis of the energy supply ratio (ESR) and details the key aspects of a calculation methodology.

Derived from the “Net Zero Emissions by 2050” (NZE) scenario of the International Energy Agency (IEA), the energy financing ratio synthesizes the dual trajectory of global investments in the energy sector by 2030. On the one hand, annual investments in renewable energies, power grids, and batteries must double compared to 2024 levels, reaching $2,500 billion USD by 2030. On the other hand, investments in fossil fuels must decrease to $400 billion USD by 2030—resulting in a ratio of 6:1 [3].

Since the IEA clearly indicated that this ratio constitutes “an important guide for financial actors looking to assess their equity and lending portfolios against net zero targets” [4], other voices have joined in.

• In January 2025, BloombergNEF (BNEF) published the third edition of their report presenting banks’ ratio of financing for fossil and low-carbon energies [5].
• In 2024, the World Resources Institute analyzed the ratio of 25 banks in its Net Zero Tracker [6], and the SBTi recommended adopting a 6:1 ratio target by 2030 for financial institutions [7].
• On the regulator side, the European Banking Authority integrated this ratio into its guidelines, published in January 2025 [8].

As a result of this growing momentum, financial actors themselves are beginning to adopt this ratio. The most significant example is the negotiation initiated by the New York City pension fund manager with major North American banks in 2024 [9]. This led to JPMorgan Chase publishing such a ratio in December 2024 [10] and commitments from Citi and the Royal Bank of Canada to publish their ratios later this year. Across the Atlantic, three banks have published their ratio: Santander—which adopted the ratio calculated by BNEF—Crédit Agricole, and BNP Paribas. Only the latter has extended the publication of its ratio with a target for 2030.

This totals four published ratios, each with different methodologies, making comparison impossible. While some are more advanced than others, none can be considered robust, and two major limitations stand out. The first concerns the scope of reported activities. Numerous omissions are noted in the fossil fuel value chain, particularly midstream and downstream, which are largely ignored by BNP Paribas and Crédit Agricole. The second concerns the financial services taken into account. While a credible ratio should consider all types of financing (including bond issuances), Crédit Agricole and BNP Paribas limit their ratio to loans—which represent 69% and 60% of their support for fossil fuels between 2016 and 2023, respectively [11].

In this context, the ILB’s publication establishes robust methodological bases and addresses the proliferation of bespoke methodologies by banks. This methodology, from a reference organization, can guide both banks reluctant to develop their own methodologies and those that need to strengthen their ratios, to ensure a credible climate strategy.

Notably, three key points must be urgently considered in the methodology proposed by the ILB:

• Consideration of all types of financing, including bond issuances, with a flow-based approach (rather than stock-based, limited to credit exposures). The ILB emphasizes that a ratio considering only loans overlooks off-balance-sheet activities, which represent a significant portion of fossil fuel financing [12]. A flow-based approach thus allows for a more realistic and dynamic assessment of banks’ financing allocated to the energy sector. Furthermore, it enables comparison with trajectories like the NZE, which relies on annual investments.
• Coverage of the entire fossil fuel value chain. A ratio limited to upstream activities (Crédit Agricole, BNP Paribas) or partially covering downstream activities (JPMorgan Chase) cannot be considered robust.
• A rigorous and ambitious approach to the scope of sustainable alternatives. This scope must exclude false solutions, particularly bioenergy and technologies that rely on fossil fuels and prolong their use. This includes fossil fuel installations equipped with carbon capture and storage (CCUS) devices and hydrogen produced from fossil gas [13]. Additionally, this scope must include infrastructures that increase flexibility and facilitate the deployment of solar and wind: modernization of power grids, and electricity storage, particularly batteries.

The absence of an independent and clear methodology was both an obstacle and a risk. It was an obstacle for banks unwilling to expose themselves to the risk of producing their own ratios and a risk of seeing the few pioneering banks generate a proliferation of incomparable methodologies. With this publication, the ILB provides a robust tool that banks eager to demonstrate the credibility of their climate strategies can adopt. Meanwhile, pioneering banks, like BNP Paribas and Crédit Agricole, should immediately seize this publication to strengthen their ratios.