Sustainable finance house of the year: BNP Paribas

Energy Risk Awards 2024: Raft of sustainable finance deals reflects bank’s strong commitment to transition financing

Constance Chalchat, BNPP
Constance Chalchat, BNPP

There are few banks that have committed themselves to sustainability as comprehensively as BNP Paribas, the winner of Energy Risk’s 2024 Sustainable finance house of the year award. ‘Sustainability’ is one of the three pillars of the bank’s 2025 strategic plan, alongside growth and technology, and the homepage of its website invites visitors to review its progress in financing the energy transition.

“Green and sustainable finance is here to stay. Innovation in this space will continue to reshape economies, drive investment in green technologies and support the long-term resilience required to face increasing environmental risks,” says Constance Chalchat, the Paris-based bank’s chief sustainability officer, global markets and corporate and investment banking. “BNP Paribas is committed to supporting clients across all sectors to navigate these challenges, and the pivot away from fossil fuels towards a low-carbon economy presents opportunities across both the corporate and institutional universe.”

That commitment is led by demand from clients for financing that supports them as they transition towards a net-zero global economy. In 2023, BNP provided €32 billion ($34.7 billion) in financing for low-carbon energy, up from €28.2 billion in 2022 and is on course for a target of more than €40 billion by 2030. By that date, it expects its stock of energy financing dedicated to low-carbon sources will reach 90%, up from 65% in 2023 and 54% in 2022.

BNP Paribas’ sustainability ambitions are also reflected in the breadth of sustainable finance deals the bank has entered into around the world. For example, it helped structure a €1.5 billion sustainability-linked bond for Enel, the Italian utility, which contained a novel key performance indicator (KPI). The bond’s coupon is linked to the percentage of Enel’s capital expenditure that is directed towards investments that are aligned with the European Union Taxonomy – that is, economic activities that contribute to the EU’s environmental policy objectives.

“That was the first bond to reconcile the firm’s entity-level medium- to long-term [climate] targets with the investments needed to reach those targets,” says Chalchat.

Agnes Gourc, BNPP
Agnes Gourc, BNPP

Other noteworthy financings include a A$475 million (US$308 million) sustainability-linked loan for the Port of Melbourne. As well as linking coupon payments to the Port’s direct emissions, it also includes a target to reduce Scope 3 emissions – including those generated by the shipping lines using the ports. It aims to do so by, among other things, developing a green methanol bunkering hub, and engaging with its customers on emission reduction opportunities.

BNP Paribas is also offering sustainability-linked hedging products. A client with an existing sustainable finance framework might enter into a forex hedge with the bank whereby the client receives a discount if it meets its sustainability KPIs. “This is a rather niche product, but it is used by clients to communicate their sustainability targets internally and allows the finance department to feel they are helping to achieve the company’s sustainability objectives,” says Chalchat.

Sending such a strong message on sustainability attracts considerable scrutiny and poses reputational risks. The bank faces a lawsuit in France brought by environmental groups who are seeking to stop it supporting oil and gas projects – despite BNP’s commitment to cut financing of oil extraction by 80% and gas by 30% by 2030. And it must tread carefully when structuring sustainable finance deals for clients that could be accused of greenwashing.

“We are one of the few banks that will advise a client not to put a green label on a transaction that is not robust enough,” says Agnes Gourc, head of sustainable capital markets. “Of course, the best stories are the ones you cannot tell, but we have cases where we’ve persuaded clients to pause and revisit their business models.”

She says that taking these decisions is only possible with the support of the bank’s top management, and with sufficient expertise within the sustainable finance team that can have difficult – and time-consuming – discussions with clients.

Nonetheless, Chalchat is bullish about the prospects for sustainable finance as companies around the world get closer to the deadlines for commitments they have made. She expects to see a shift from use-of-proceeds financing that is dedicated to discrete green projects or activities towards transition financing to enable the broader shift away from carbon-intensive business models. “There is an underlying push to ramp up delivery of financing to deliver decarbonisation,” she says.

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