Crédit Agricole advances on climate change, but drags its feet
Crédit Agricole’s announcement today (1) reflects the limits of the COP28 agreement adopted yesterday in Dubai (2): a transition away from fossil fuels that leaves the door open to financing oil and gas expansion. Despite the adoption of ambitious decarbonization targets, the French bank has allowed room to finance new fossil fuel infrastructure projects such as liquefied natural gas (LNG) terminals, as well as companies developing new oil and gas fields or infrastructure.
Crédit Agricole is raising its target for the absolute reduction of financed emissions linked to loans to the oil and gas sector to -75% by 2030 with a 2020 baseline, compared with a previous target of -30% (3). Despite its apparent ambition (4), achieving this target does not guarantee an end to support for companies developing new oil and gas projects (5), which runs counter to scenarios aiming to limit global warming to 1.5°C. The proof is in the pudding: while Crédit Agricole may have exceeded its previous target of 30% with a 40% reduction since 2020, but Reclaim Finance has identified at least 21 transactions benefiting just 12 major oil and gas companies over the same period (6).
Lucie Pinson, Director of Reclaim Finance: "By adopting an ambitious target for cutting oil and gas sector emissions, Crédit Agricole is prepared to clean up its customer portfolio by no longer financing those who are not rapidly decarbonizing their activities. But while this sends a welcome signal, the approach is not enough to claim to be aligned with a target of limiting global warming to 1.5°C. The urgency of climate change requires action now against oil and gas expansion, but Crédit Agricole risks providing new, untargeted financial services to companies developing new fossil fuel projects, which runs counter to its own climate commitments. We will be paying very close attention to all financing to the energy sector in the coming months and denounce any transaction incompatible with a robust 1.5°C trajectory."
Crédit Agricole has announced strict exclusion measures that mean it will stop financing gas field projects. Like the December 2022 decision not to finance any new oil fields, this measure is not likely to have any material impact as Crédit Agricole does not appear to have granted any such financing in recent years (7). But, the bank has directly financed new LNG terminals, such as Port Arthur in the USA in March 2023 (8). And while it is still advising TotalEnergies on the development of Papua LNG in Papua New Guinea (9), no commitment has been made to stop financing this type of project in the future.
Lucie Pinson, Director of Reclaim Finance: "Crédit Agricole is missing a trick. At the very least it could have aligned itself with the policy of Société Générale or HSBC, who have put an end to their direct financing of certain new LNG terminals. Any new liquefied natural gas project hampers our chances of limiting global warming to 1.5°C, in addition to entailing major financial risks, given that 70% of projects already under construction or approved may not be profitable, according to the IEA. Crédit Agricole’s refusal to end its support for this type of project and to give up its financing of Papua LNG perpetuates the confusion over which energy should be abandoned and which should be developed. Make no mistake about it, gas is a fossil fuel and no emissions capture mechanism will make it compatible with a 1.5°C trajectory."
Crédit Agricole’s announcement also excludes independent companies active in oil and gas extraction. These companies are responsible for 19% of 2022 production and 20% of expansion plans (10). In other words, the majors and integrated companies in the oil and gas sector, which include some of Crédit Agricole’s major clients, have been spared. Crédit Agricole says it wants to support all its customers in the transition, but intends to assess each transaction on a case-by-case basis in the light of their commitments.
Lucie Pinson, Director of Reclaim Finance: "So much useless procrastination, playing into the hands of polluters who want to slow down the transition to sustainable energy. TotalEnergies, Eni and Saudi Aramco are not in transition, and there is no justification for non-earmarked funding for them until they have given up developing new fossil fuel projects. Crédit Agricole says it wants to be a player in the transition and in renewables. Let it devote itself fully to this, without wasting time with the players of the past."
Finally, Crédit Agricole has announced a number of targets for the financing of renewables, low-carbon energy, clean technologies and energy efficiency. These commitments are welcome in order to meet the targets of tripling renewable energy capacity and doubling energy efficiency measures by 2030 agreed in the Dubai agreement, but lack clarity, particularly with regard to how they fit with previous commitments and the scope of energy sources and technologies covered. Reclaim Finance calls on Crédit Agricole to clarify these commitments and restrict its financing objectives to sustainable energy, avoiding the inclusion of false solutions such as CCS.
- See the Crédit Agricole press release.
- Reclaim Finance, Now for the real work to ensure a fossil fuel phaseout, December 2023.
- The decarbonization target relates to financed emissions from loans linked to the upstream, midstream and downstream activities of customers active in the oil and gas sector (scope 1, 2 and 3), and is expressed in absolute terms, with 2020 as the reference year.
- The IEA’s NZE scenario projects a 25% reduction in CO2 emissions (scope 1, 2 and 3) linked to oil and gas between 2021 and 2030 (calculated from Net Zero Roadmap: A Global Pathway to Keep the 1.5°C Goal in Reach. 2023 Update, Table A.4, p.198, September 2023), and a 75% reduction in methane emissions linked to the sector’s operations (IEA, The Oil and Gas Industry in Net Zero Transitions, p.74). Societe Generale, for its part, has committed to a target of 70% reduction in financed emissions linked to its loans between 2019 and 2030 (leading to 20.5 MtCO2e in 2030). Crédit Agricole’s target of 6 MtCOe in 2030 is thus more ambitious than that of Société Générale. The comparison with BNP Paribas is more difficult insofar as the latter has not adopted an equivalent absolute emissions target for the entire value chain by 2030, but has adopted sector exposure targets of -80% for oil and -30% for gas from 2022 to 2030,(BNP Paribas, Climate report 2022, page 39 May 2023). Furthermore, unlike Société Générale and BNP Paribas, Crédit Agricole has not adopted an exposure target for 2030, but only for 2025 (-25% compared with 2020).
- Banks apply the Partnership for Carbon Accounting Financials (PCAF) methodology, which accounts for “financed emissions” using a formula that takes into account the value of companies on the stock market. If a company’s value rises, the financed emissions associated with that company will fall, even if its emissions and the amount of its bank loans remain unchanged. The very good stock market performance of oil and gas companies following the invasion of Ukraine has so far underpinned the very sharp falls in financed oil and gas issues in bank portfolios.
- Source: Bloomberg database. The 12 companies are : TotalEnergies, Eni, BP, Shell, Repsol, Equinor, Chevron, ExxonMobil, ConocoPillips, Adnoc, Saudi Aramco, Qatar Energy.
- IJGlobal database.
- PFI, Mega LNG projects make it to finish, May 2023.
- Defund Total, Papua LNG.
- According to the Global Oil and Gas Exit List.
Reposted from the original news story on the Reclaim Finance website here.