BNP Paribas to Stop Financing Shale, Oil Sands Projects -- Update
October 11 2017 - 10:07AM
Dow Jones News
By Noemie Bisserbe and Sarah Kent
PARIS--French lender BNP Paribas SA said Wednesday it will no
longer finance shale and oil sands projects, in one of the clearest
signs yet the banking industry is re-evaluating its relationship
with the oil sector amid mounting pressure from investors and top
financial institutions.
France's largest listed bank said it would stop working with
companies whose main business is the exploration, production,
distribution or marketing of oil and gas from shale or oil sands.
BNP Paribas won't finance oil or gas projects in the Arctic region
either, the bank said.
"These measures will lead us to stop financing a significant
number of players that don't further the transition toward an
economy that emits less greenhouse gas," BNP Paribas Chief
Executive Jean-Laurent Bonnafé wrote in a post on LinkedIn
published Wednesday.
BNP Paribas is one of the first banks to eschew parts of the oil
sector. Many governments are taking steps to curb emissions and
investors have been increasing pressure on companies over their
environmental footprints.
"Shareholders want to invest in companies that have a
sustainable business model and are resilient in the event of new
climate laws and regulation," said BNP Paribas's global head of
corporate social responsibility, Laurence Pessez.
Earlier this year, a panel of top financial institutions and
companies led by Michael Bloomberg published a series of guidelines
pushing for companies to disclose more about the impact of climate
change on their businesses.
"I think personally the writing is on the wall over the medium
term for the most carbon-intensive fossil fuels," said Mark Lewis,
a member of the panel. It is backed by the Financial Stability
Board, a body that makes recommendations to the Group of 20 nations
about financial regulation and policy.
"The banks will adapt like all other companies to changing
economics and changing investor preference," Mr. Lewis added.
Exxon Mobil Corp. faced a shareholder revolt this spring as
investors ignored management recommendations and voted in favor of
a resolution calling for more information on how climate change and
regulation could affect the company.
Still, there is little sign that the industry is facing
difficulty raising money. The shale oil sector has boomed over the
last three years, despite a steep drop in oil prices. Most shale
developments are in the U.S. where the Trump administration has
rolled back tougher environmental regulation. U.S. companies also
have access to a deep pool of investors and banks.
BNP Paribas has already made moves to reduce its financing of
coal mines and coal-fired power plants and expand its investment in
renewable energy. Earlier this year, BNP Paribas said it won't
finance coal energy sector companies that aren't seeking to
diversify their energy sources.
Weeks before the COP21 climate change conference in Paris in
December 2015, the bank pledged to increase total financing for
renewable energy to EUR15 billion ($17.7 billion) and set aside
EUR100 million for investment in startups working on solutions for
energy transition.
It is now turning its back on some of the more contentious parts
of the oil sector. Oil from tar sands like those in Canada have
long faced criticism because of their high carbon intensity
compared with more conventional oil sources. Many large oil
producers like Royal Dutch Shell PLC have sold oil sands assets in
recent years as falling prices made their economics less
attractive.
Extraction of shale oil and gas has also faced wide-ranging
concerns about its environmental impact and the technique of
extracting oil and gas by fracking has been banned in parts of
Europe, including France.
A BNP Paribas spokeswoman declined to comment on the bank's
exposure to shale and oil sands projects, but analysts estimate
that it is limited.
The bank's credit risk exposure to energy excluding electricity
was of EUR30.4 billion as of Dec. 31, 2016, according to corporate
filings.
Write to Noemie Bisserbe at noemie.bisserbe@wsj.com and Sarah
Kent at sarah.kent@wsj.com
(END) Dow Jones Newswires
October 11, 2017 10:52 ET (14:52 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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