BNP Paribas commits to no longer finance companies with no strategy to exit the coal power sector
Lucie Pinson, firstname.lastname@example.org | +33 (0)6 79 54 37 15
Lucie Pinson, email@example.com | +33 (0)6 79 54 37 15
BNP Paribas announces new measures (1) to phase out coal power. It lays out the strategy to reduce to zero its exposure to coal-fired electricity by 2030 in EU and OECD countries, and by 2040 in all other countries of the world. Reclaim Finance welcomes the measures announced and calls other international banks to follow in order to actively support the urgent phase-out of the coal sector.
To achieve these ambitious goals, BNP Paribas commits to stop financing (2) companies that would add, in any way, new electricity production capacities to their coal-fired power plants, whether through purchasing, the expansion of existing plants or the construction of new ones. Companies such as the South-Korean KEPCO, the Japanese Marubeni or the Indonesian PLN, who are all still planning on building new coal-fired power plants in many countries throughout the world (3), will therefore no longer be able to benefit from BNP Paribas’ support.
In addition, BNP Paribas aims at financing only companies that have adopted a clear coal exit strategy, with a timeline that specifies the different steps that will lead them to no longer possess or operate coal-fired power plants in EU and OECD countries before 2030, and in all other countries before 2040.
- To achieve these objectives, BNP Paribas commits to excluding already in 2020 all companies that have not publicly defined a coal exit date or who are planning new capacities. It is therefore a significant number of companies that are going to be immediately excluded from now on. For all the others, they have until 2021 to reconsider their coal exit dates, align them with the 2030 – 2040 exit goal and adopt a convincing policy to reach this goal;
- Every year, BNP Paribas will then monitor the companies’ exit strategies so as to ensure that they are still on track to fulfill their promises and achieve a full coal exit by 2030 – 2040;
- BNP Paribas’ policy clearly indicates that companies that do not act upon their demands will no longer be able to benefit from some types of support. It further specifies that only financial services strictly linked to green electricity projects will be allowed for clients that do not have a defined coal exit strategy for 2030 – 2040;
- It is a clear signal sent to companies such as the German RWE, the Finnish Fortum or the Czech CEZ (4). These companies have until the end of 2021 to adopt a coal exit plan in line with the 2030 objective, without which they take the risk of losing one of their primary sources of financing.
With this policy, BNP Paribas has now become the 11th French financial actor to adopt a strong and robust exit strategy for electricity produced from coal. Société Générale also adopted a coal policy yesterday (5), but its far less ambitious policy does not support a full phase-out of the coal sector. Société Générale fails to adopt any demand to companies with less than 25% of their revenues from the coal sector.
However, unlike other banks, such as Natixis or Crédit Mutuel, BNP Paribas has not adopted any immediate and strict exclusion criteria for its existing clients. As a result, the quality of its policy depends solely on its commitment to call on companies to adopt a detailed exit plan from electricity production from coal by 2030 and 2040. Furthermore, it is also reliant on BNP Paribas diligently following through its commitment to suspend all new financial service to companies that will not have adopted such an above mentioned plan by 2021, or that fail to implement the plan once adopted.
We will analyse the financial services provided by BNP Paribas in the two years to come to ensure that the policy is fully implemented. The analysis will be based on the data found in the GCEL (Global Coal Exit List).
It is worth noting that BNP Paribas has announced that it will soon adopt a “similar policy on the remaining of the coal value chain, from mining to transportation through the sale of coal.”
“We only applaud the immense progress made by BNP Paribas today and call international banks to follow. Banks can actively support a full exit of the coal power sector by 2030 in Europe and OECD countries and by 2040 in other countries by banning as BNP Paribas, both financial services to companies with coal expansion plans or failing to plan and implement a coal phase-out. However, we will remain extremely cautious when looking at the implementation of the bank’s new policy. A failure to effectively translate the policy into clear actions could neutralize its impact. Last but not least, it’s now time to adopt similar criteria on coal mining and infrastructures in order to make its coal exit complete”, says Lucie Pinson, Founder and Executive Director, Reclaim Finance.
“BNP Paribas has been one of the staunchest supporters of European coal power utilities over the years. Finally, we will close that chapter as the bank’s clients RWE, CEZ and Fortum/Uniper will no longer be benefitting from financial services unless they commit to closing their coal business by 2030. Given BNP Paribas’ prominence as a global institution this sets the expectation for other global banks with international market presence to follow suit”, says Kaarina Kolle, Senior coal finance and utility coordinator, Europe Beyond Coal.
(1) BNP Paribas’ policy can be found here
(2) The criteria announced by BNP Paribas AM in 2019 remain as they are for its asset management
(3) BNP Paribas is the 7th most significant banker of KEPCO (USD 600 million between 2017 and September 2019), the 11th of PLN (USD 299 million), and 16th of Marubeni (USD 65 million)
(4) According to upcoming financial research that will be published by Europe Beyond Coal campaign in July, between November 2018 and December 2019 BNP Paribas has granted EUR 185 million to RWE, EUR 150 million to ČEZ, and EUR 1263 million to Fortum, whose subsidiary Uniper has just opened the new coal-fired power plant Datteln IV in Germany
(5) Reclaim Finance’s analysis of Société Générale’s coal policy is available here
2nd July 2020 Reclaim Finance press release