French banks BNP Paribas and Credit Agricole, two of Europe’s top three banks by assets, will no longer underwrite bond issues for oil and gas development, in the latest shift in financing policy for the sector in Europe.
The banks provided clarification on the issue in documents for their annual general meetings this month.
BNP Paribas indicated at its general meeting last week that it would not participate in bond issues for oil and gas companies.
The environmental group Reclaim Finance said it “welcomes this change at a time when the bank is reducing its financing of major companies in the sector, and calls on BNP Paribas to formalize this approach by including this rule in its climate policy and extending it to other financial services that could contribute to oil and gas expansion.”
BNP Paribas said in May 2023 that it would no longer provide any financing for the development of new oil and gas fields, regardless of the financing arrangements. The bank has also pledged to reduce its financing for oil exploration and production by 80% by 2030, as part of its energy transition goals.
Another major French bank, Credit Agricole, also said it had effectively stopped issuing oil and gas bonds. At the bank’s general meeting on Wednesday, general director Philippe Brassac said: “We no longer participate in issues [obbligazionarie] that are not clearly green, or at least that do not match our green framework,” as quoted by Reclaim Finance.
A trend that they had already announced
In recent years, European banks have limited their exposure to oil and gas.
Under pressure from ESG and shareholder trends, major European banks have announced tougher rules on fossil fuel financing over the past two years.
Britain’s HSBC said in late 2022 it would stop financing the development of new oil and gas fields and related infrastructure, as part of a policy to support and finance a net-zero transition.
UK-based Barclays announced in February 2024 that it would abandon direct financing of new oil and gas projects, joining other major European banks in stopping financing fossil fuel expansion.
Barclays is also trying to avoid accusations of greenwashing with a new set of guidelines on what ‘transition finance’ is and how its new transition finance team should apply it.
A correct choice?
From the shareholders’ point of view, this is an incorrect choice: a bank should think about maximizing its medium-long term profit. In this case, investment in a potentially profitable sector is ruled out a priori on the basis of social reasons, the definition of which would be up to the states, not the banks.
This can lead over time to a lower valuation of the shares and to a greater potential riskiness of the banking assets.
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