It is getting increasingly difficult to describe a bank’s performance in the sustainable finance category without resorting to cliché. Is it walking the walk? Accompanying clients on their transition journeys? Or advancing on its climate ambitions?
Yet there is one cliché that is unavoidable: that BNP Paribas is the poster child for sustainable banking at scale. Winner of the world’s best bank for sustainable finance award for the third year in a row, the French bank is doing all of these things and more.
Considering that the French lender is facing a climate lawsuit in its home market and was reprimanded in the Banking on Climate Chaos 2023 report for being the 11th biggest financier to fossil fuels between 2016 and 2022 (down from 10th the year before), its reputation as the benchmark for sustainable finance is even more noteworthy.
This is because, under the leadership of corporate and institutional banking company engagement head and global markets chief sustainability officer Constance Chalchat, BNPP has shown that it is prepared to make tough choices.
Shortlisted
“By 2030, we will have completed transitioning over 80% of our energy production financing activities to the production of low-carbon energies,” she tells Euromoney.
The bank now takes a strict approach to transactions.
“We’re not afraid to pull out of something if we feel the sustainability objectives are not material or ambitious,” Chalchat says.
Nevertheless, the bank has been as busy as ever. In the 12-month period ending June 2023, BNPP ranked first in the global environmental, social and governance bond league table by bookrunner, with 205 deals and a 5.36% market share.
In January 2023, BNPP announced that it would accelerate its strategic shift away from fossil fuels and towards clean energy. The bank set big and bold objectives for 2030: reduce financing credit exposure for gas production by more than 30%; reduce financing for oil production to less than €1 billion; and provide €40 billion in financing for the production of low-carbon but primarily renewable energies.
A number of impressive deals have already contributed towards these goals, across most of the hard-to-abate sectors and in innovative technologies.
BNPP was sole sustainability structuring adviser on the €745 million 10-year sustainability-linked bond for mining group Anglo American, with key performance indicators on greenhouse gas emissions and water usage. It held the same role on Slovenia’s sovereign sustainability bond, a €1.25 billion, 10-year transaction supporting the government’s investments in transitioning to a low-carbon and circular economy.
BNPP Portzamparc was also joint global coordinator and bookrunner in the €110 million IPO of European green hydrogen producer Lhyfe. The bank worked on Korean petrochemical manufacturer SK Geo Centric’s landmark sustainability-linked loan, a W475 billion ($367 million) deal to support its recycling and eco-friendly product business.
And in the US, BNPP worked on General Motors’ inaugural $2.5 billion green bond, issued under the firm’s new sustainable finance framework.
“Under the framework, the proceeds are used both for green assets like electric vehicles and charging stations; and social projects, whereby GM is prioritizing a target population both on the client side and in the supply chain,” explains Agnes Gourc, co-head of sustainable finance markets at BNPP.
The fact that the French bank was selected by GM even though it is not a leader in the US conventional market speaks to the group’s international reputation as a sustainability expert. In fact, social impact transactions have become something of a signature move for BNPP.
We’re not afraid to pull out of something if we feel the sustainability objectives are not material or ambitious
In 2022, the bank expanded its impact bond portfolio as an arranger and investor with three deals, including the first ‘just transition’ impact bond in France, led by Envie Autonomie.
As an issuer itself, BNPP came to market with an inaugural €50 million social bond, a structure that it says will enable investors to engage in social impact and support social causes through a donation mechanism embedded in the transaction.
Other notable social transactions include Legal & General’s syndicated social loan to support the delivery of more affordable housing in England, which BNPP coordinated.
BNPP has built highly skilled teams in its efforts to achieve additionality, as Gourc explains.
“The best deals are the ones when we can fully engage with the client and, when needed, reach a decision to pause the actual structuring for a labelled transaction because we reach a point where something in the business model needs to change – and that can take time," she says. "That is how you achieve additionality.”
In terms of protecting and developing natural capital, the field is still in an early stage of development. However, BNPP is active in market initiatives around setting standards in biodiversity.
The bank joined Carbonplace, a banking consortium that connects buyers and sellers of carbon credits to ensure transparency and traceability on the Voluntary Carbon Market. In July, it was listed as one of the inaugural members on the Hong Kong International Carbon Market Council.
In July 2022, BNPP Asset Management published an analysis of the biodiversity footprint of its investments based on the Corporate Biodiversity Footprint methodology, which covers more than 1,800 companies included in its equity and bond funds and equating to 70% of its corporate assets under management.