Awards for Excellence 2018
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Also shortlisted |
HSBC |
Bank of America |
| View full 2018 results |
There are a few banks leading the way globally on sustainable finance – firms such as HSBC, Bank of America and Crédit Agricole – but only one that has committed itself in a way that no other bank can match.
This bank is turning down deals and pulling out of sectors that are not sustainable, as well as driving new sustainable finance initiatives across all of its businesses. In doing so, BNP Paribas sets an example of what all banks seeking to be the world’s best for sustainable finance could do.
What is perhaps unique to BNP Paribas is that sustainability was a passion that came from within. Several hundred employees across all the parts of its businesses began collectively to look at their sectors through a lens of sustainability.
“In key levels of middle management and below were professionals really passionate about environmental and social issues, and they each brought that to where they were doing business,” says Hervé Duteil, chief sustainability officer for the Americas. “While it was not necessarily immediately revenue generating, they embraced the vision and, as a result, shifted the overall culture.
“Our top management further supported this transition, especially over the last 12 months with the formation of the company engagement department that looks at unifying the overall bank’s strategy. The culture at BNP Paribas is therefore a very genuine one of wanting to lead on sustainability and financing it all ways possible.”
The bank started with coal back in 2011; coal-fired plants do not receive financing, while corporate loans are only given to targets that are engaged in serious transitioning. In Poland, BNP Paribas froze credit to energy corporates and utilities not engaged in transitioning; in Australia the bank has cut support by 90% since 2015. Last year, BNP Paribas itself became carbon neutral.
More recently, the bank decided to no longer finance oil sand and shale gas projects, as well as any related infrastructure. You won’t find the bank in the Trans Mountain Pipeline deal for example or working with Keystone or energy export terminals. And it also no longer finances any projects in the Arctic region.
Similarly, tobacco came off its list last year.
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| Laurence Pessez |
“There’s no future scenario where tobacco could ever be sustainable,” points out Laurence Pessez, global head of corporate social responsibility for BNP Paribas in Paris.
The bank also has a zero net-deforestation policy – that means it will only finance companies in paper pulp, agriculture and palm oil that are in some way replacing the raw materials that they use.
These are not easy measures for banks to take, but Pessez says there are many opportunities to replace business by targeting renewables, recycling and green industries. It has financed €155 billion to support clean energy transition.
And opportunity abounds in creating new products and structures more suited to the new era. The UN Sustainable Development Goals (SDGs) are a focus for BNP Paribas. At least 15% of the bank’s corporate loans must be extended to companies contributing directly to the achievement of those goals. It also has an index tied to the SDGs.
The banks helps clients – both corporate and retail – move towards their own sustainability goals. The bank offers training on transitioning away from carbon and it has portfolio management tools, through its partnership with Sycomore Asset Management, that can rate client portfolios on net environmental contributions.
BNP Paribas excels in terms of new structures in sustainable finance. Last year, the UN Environment Programme and BNP Paribas signed an agreement to establish finance facilities through partnerships worth up to $10 billion to drive sustainable economic growth.
One of the first initiatives developed by this agreement was the Tropical Landscapes Finance Facility (TLFF). This mobilizes international capital for agriculture, renewable energy and deforestation-free supply chains in Indonesia. The first loan under the TLFF was made in February, a $95 million loan to a joint venture between Michelin and Indonesia’s Barito Pacific Group, funded by the first sustainability project bond ever issued in Asia. This is the first of a multi-tranche facility that will enable the rehabilitation of an area of land bigger than Singapore, and which will create 16,000 jobs on a sustainable rubber plantation.
In western Europe, BNP Paribas has also been at the forefront of ground-breaking deals. The bank is the only one to have acted as lead manager for every green bond sovereign issuer in Europe to date, including that for Belgium. It was also the sustainability coordinator on Danone’s €2 billion environmental, social and governance-linked revolving credit facility – a deal that has solidified the possibility of corporates developing ESG and corporate responsibility ratings as part of their financing plans.
In the US, BNP Paribas partners with Social Finance US, a not-for-profit group that focuses on social bonds. In Connecticut, the bank worked with Social Finance to issue an impact bond targeting the state’s challenges in opioid addiction.
In Brazil, the bank has developed a note where a small percentage of the assets under management is given to a cancer organization. Duteil calls it a note with a “philanthropy kicker” and it is another model developed to lead the sustainable finance market worldwide.
