“We need to ensure that we have robust data to make sure that every ESG [environmental, social and governance] part of our proposed transformation is attached to a very real, strong and very robust process,” says Antoine Sire, head of company engagement forBNP Paribas and member of the bank’s executive committee. “We are transforming our data repository, we are transforming our decision chains and we are transforming our skills.”
He says that the bank has, at times, deliberately slowed down the pace to ensure that progress is built on solid ground through a pragmatic approach. And data is one of the most important elements of this foundation.
BNPP, which wins the award for the world’s best bank for ESG data and technology, has had a strong focus on developing its ESG data capability for more than a decade. Some of the data effort is for private internal use; some is to improve its public communications; some to help clients’ ESG initiatives; and some – like its open-sourced data strategy – is intended to create common ground for all to work together on sustainable issues, such as net-zero targets and biodiversity.
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Internally, the bank has developed a scientific research programme to help climate research, called the Climate and Biodiversity Initiative, with advice from experts from the United Nations Intergovernmental Panel on Climate Change. The programme was very widely marketed internally in order to reinforce employees’ awareness about climate change. Sire says it has left “almost no internal climate scepticism” in the bank. Nevertheless, the bank did little external publicity for the initiative over fears of accusations of greenwashing – a constant concern.
The bank relaunched its huge internal ESG data function last year. Now simply called Impact, all 200,000 BNP employees can access the database via multiple dashboards that are designed for different areas of the bank, such as global markets, corporate banking, asset management and private banking.
BNPP has now incorporated ESG metrics and evaluations into the equity reports of 580 companies covered by its equity research department.
Goulven Charlès, head of corporate and institutional banking (CIB) analytics consulting at BNPP in Paris, is leading the development of Impact. He says the past 12 months saw the bank increase the number of external structured data providers, as well as move to use artificial intelligence to harvest non-structured data such as news sources.
The bank has also formalized its own data collection. Client relationship managers are required to complete ESG assessments for all companies. Given that only 20% of private companies report carbon emissions data, this has been an important step in enabling the bank to begin to quantify the carbon emissions of companies beyond those that self-report. And with the high level of discrepancy between private-sector providers of such data, this enables the bank to have conviction in its own view of its Scope 3 emissions.
“ESG is now a cornerstone of the decision-making process of BNP Paribas,” says Charlès. "As such, we have developed our own internal ESG assessment that relies on detailed questionnaires, supporting the collection of data from our clients."
Marième Rocchi, head of the sustainability centre, BNP Paribas CIB, says that data is also being used to help price deals by creating new pricing models – particularly in the emerging hydrogen space.
“Across all segments of clients, BNP Paribas is embedding ESG data into solutions. This includes pioneering new segments of green mobility, especially supporting the hydrogen value chain or shared mobility,” she says.
The bank was joint structuring adviser on Maersk’s inaugural green bond that was used to finance green methanol vessels. It also acted on Hyundai’s first long-term leasing of trucks that run on hydrogen produced by hydroelectricity. Elsewhere, BNPP investment in green mobility has paid off with key financing mandates from Jaguar Land Rover and Ridecell.
BNPP is committed to making sure that many of these models – and their underlying data, methodologies and technologies – are shared publicly. The open-source strategy that the bank undertook in 2021 (under the Linux Foundation OS-Climate initiative in partnership with companies such as Red Hat, Microsoft and Amazon) continues to create momentum.
We are transforming our data repository, we are transforming our decision chains and we are transforming our skills
Under the leadership of Matthew Sandoe, ESG risk manager at BNPP and physical risk lead for OS-Climate, the bank has taken the lead on modelling the physical risk component of OS-Climate’s risk and resilience work stream.
“We are building open-source tools that build climate models on top of geospatial data to enable risk quantification for physical assets,” says Sandoe. “The measurement of these risks requires us to access data on both a massive and granular scale.”
The work is similar to many proprietary risk models being developed by the insurance industry but, as Sandoe points out, physical climate risk can be an even bigger issue for the banking industry.
“Insurers and reinsurers mostly need to look 12 months ahead and can limit financial exposure by putting contingencies into contracts. Banks and other financiers are financing for the long term and need to account for business disruption risk in addition to asset damage.”