Two prominent European banks, Crédit Agricole and BNP Paribas, have taken a significant step back from oil and gas bond deals. This move reflects a growing trend among financial institutions to align their portfolios with climate goals and reduce their exposure to fossil fuel financing.
Both banks have clarified their existing policies, stating they will no longer underwrite bond issues for the oil and gas sector unless they include green restrictions. This means that future bond deals will need to be earmarked for green projects to receive their backing.
The decision comes amid mounting pressure, particularly in France, for banks to demonstrate their commitment to climate-friendly finance. Senior executives from both banks have faced scrutiny from the Paris Senate regarding their involvement with oil and gas companies like TotalEnergies.
While global banks have generally reduced financing for fossil fuel projects since the COP26 climate summit, they have been slower to extend their policies to other core activities, such as general-purpose loans and bond underwriting. This recent move by Crédit Agricole and BNP Paribas signifies a potential turning point in the industry's approach.
However, the policies of both banks still allow for bonds that finance green projects or deals with issuers in the fossil fuel supply chain who do not directly produce oil and gas. This leaves some room for continued involvement in the sector, albeit with a focus on supporting the energy transition.
This development comes at a time when banks are starting to disclose the carbon footprint of their capital market deals, providing investors with greater transparency and potentially influencing their investment decisions.
