Oil and gas: BNP Paribas gets it wrong

BNP Paribas has just announced measures on the financing trajectory for the energy sector (1). In addition to measures aimed at developing low-carbon solutions (2), BNP Paribas is committed to reducing outstanding financing for oil production by 80% (3) and 30% for gas production. horizon 2030 ( 4).

says Lucie Pinson, director of Reclaim Finance : “BNP Paribas recognizes the need to reduce our dependence on oil and gas, a source of risk, and to increase support for solutions. However, the method is not correct, and everything seems to indicate that the French bank will continue to finance a few large clients, despite its expansion strategy in fossil fuels, such as TotalEnergies..”

Adoption of decarbonisation targets does not guarantee an immediate end to financial services for oil and gas expansion. There are several reasons for this (5), notably that these targets apply only to a subset of financial services (loans, not the issuance of stocks and bonds) and that they include short-term loans due by 2030. If the achievement of these goals inevitably requires the exclusion of many of the bank’s clients, the latter will be able to retain others in its portfolio, regardless of the weight of its activities or even its expansion plans in the sector. This could include European oil and gas companies such as TotalEnergies, as well as BP and Shell, for which BNP Paribas is the lead banker between 2016 and 2021 (6).

“We cannot settle for 2030 targets when there is an urgent need to end all support for worsening climate change. “Although BNP Paribas has announced many measures that reflect its approach to achieving these goals, it cannot take a firm stance against oil and gas expansion and will continue to add fuel to the fire by directly and indirectly financing new projects in the sector.” Lucie Pinson continues.

Unlike peers ING and HSBC, BNP Paribas is not committed to ending all direct support for new oil and gas projects (7). The bank claims it has not financed an oil project since 2016 (disputed claim (8)) and says it “wants to keep financing in the gas sector a priority for new generation thermal power plants with low emission rates”. such as security of supply, gas terminals and gas transport fleet”.

“What are presented as restrictions on the gas sector instead reflect the bank’s desire to support its clients in developing new climate bombs that are useless for our energy security but deadly for our climate goals. Gas is not a transition energy and it is very important to recognize its real impact on the climate” (9).

After January 1, 2022, no new liquefied natural gas (LNG) projects will be approved there unless a new oil and gas production project is approved in the International Energy Agency’s (IEA) Net Zero (NZE) scenario limiting warming to 1.5°C. January 1, 2023 or decades (10).

Regarding financial services for companies (rather than projects), which make up the vast majority of support for the energy sector, BNP Paribas no longer takes any steps to encourage its clients not to develop new oil and gas projects (11) but “specialized or related financing activities in this sector”. indicates that you want to program a stop.

To illustrate the commitments of BNP Paribas: the bank among its membership Net-Zero Banking Alliance (NZBA) supported TotalEnergies through 2 operations in April 2021 and August 2022, totaling $1,464.8 million (12). The French major is the world’s 7th developer in oil and gas production (13). In addition to the EACOP pipeline project, TotalEnergies plans to allocate 45% of its capital expenditures to the oil sector, with approximately 20% earmarked for exploration and new project development (14). BNP Paribas has said it will not finance the EACOP pipeline project directly, and its latest announcements indicate that it will ask TotalEnergies not to use its capital for oil activities.

“Incorporating provisions limiting the use of funds into financing agreements is a good way to signal to the bank’s clients that they wish to see them withdraw from certain activities. However, since money is convertible, BNP Paribas cannot guarantee the absence of support for its clients’ oil activities. Once again, BNP Paribas is wrong in its approach, especially since there is an urgent need to force companies to stop developing new projects, and no 1.5°C scenario requires ending all support for oil by 2030. it was more urgent to call on companies to abandon new oil projects and to condition the provision of new services to meet this demand in a short time.” Lucie Pinson concludes.

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