BNP Paribas accelerates coal phase-out as BlackRock predicts clean energy future

BNP Paribas will no longer accept new customers whose share of coal-derived revenue accounts for more than 25%

BNP Paribas had pledged to stop all funding for thermal coal globally by 2040, with an interim target of 2030 for EU Member States.

The commitment would see the bank working with thermal coal companies currently covered by its portfolio, to encourage them to shift to new, low-carbon business models. If they fail to do so, they will face divestment in 2030, if based in the EU, or 2040, if located elsewhere.

However, the bank has since expanded the commitment to end the use of cola by 2030 to all OECD countries, with the 2040 target maintained for everywhere else. BNP Paribas will no longer accept new customers whose share of coal-derived revenue accounts for more than 25%.

“For almost 10 years our policies have attested to our commitment to be a major international bank that is particularly advanced with regard to the energy transition. BNP Paribas is the first bank in the world that has set a coal-exit date, decided to end the financing of shale-gas and tar-sands specialists, and acquired a leading position in financing renewable-electricity projects,” Jean-Laurent Bonnafé, director and chief executive of BNP Paribas said.

“Beyond coal and unconventional hydrocarbons, we are putting in place innovative tools that will enable us to systematically introduce environmental criteria into our lending decisions and align our portfolio with the objectives of the Paris Agreement.”

BNP Paribas also has a time-bound target for financing renewable energy development. In 2015, the bank pledged to double its renewable energy financing to €15bn (£12.83bn) by 2020. Having surpassed that target in December 2018, the firm will now work to provide a cumulative €18bn (£15.4bn) by 2021.

Renewable focus

BNP Paribas is the latest bank to accelerate a move away from the fossil fuel industry, and many within the investment community are looking to renewables to spur economic activity and transactions, especially as the world attempts to stimulate markets during the economic downturn caused by the coronavirus.

The world’s largest investor BlackRock has this year announced new steps to embed climate action into its investment decisions. It is in the process of removing companies that generate more than 25% of revenue from thermal coal production from its active investment portfolios.

The past 12 months have seen BlackRock face mounting calls from activists to remove fossil fuel firms from its $6.9trn portfolio; to align its engagement with the Paris agreement; to back positive climate-related shareholder resolutions more than 10% of the time; and to heed the recommendations of Climate Action 100+ – an investor group advocating for finance to step up ambition and action on climate change. BlackRock has since joined the group, which represents more than 370 firms with more than $35trn in assets under management collectively.

The investor, which manages $50bn in solutions that support the transition to a low-carbon economy, has also reiterated its decision to cut investment from companies failing to act on climate change or disclose relevant data.

According to David Giordano, BlackRock’s global head of renewable power, low-carbon solutions, namely renewables are strongly positioned to weather the economic downturn.

“The collapse in oil prices has obviously been dramatic, but oil is mainly a transport fuel—it generates only a tiny percentage of the world’s electricity. Meanwhile, the structural drivers for the energy transition and the role of renewables in it are still very much in place,” Giordano said.

“These drivers are mutually reinforcing. First, there’s the electrification of everything. Electricity has become the world’s preferred way of consuming energy, and its 19% share of energy demand is expected to grow to 45% by 2040, according to the International Energy Agency. At the same time, we’re seeing continued cost declines for renewables. In short, the global picture is a future of greater reliance on electricity, and greater use of renewables to produce that electricity. And that picture hasn’t changed.”

Canada tar sands

It’s not all positive news on the green investor front.

A new campaign from Unfriend Coal has claimed that European insurers Lloyd’s, Zurich and Munich Re are the biggest supporters of Canada’s Trans Mountain pipeline, which is set to expand a tart sands oil project that would undermine Canada’s national climate targets.

Trans Mountain is looking to expand the pipeline connecting tar sands in Alberta to the Pacific coast outside Vancouver, adding an extra 590,000 barrels a day of capacity, increasing daily capacity to almost one million barrels.

According to Unfriend Coal, Lloyd’s insurers are responsible for around $50m of cover and have underwritten the rest jointly with other insurers. Additionally, Zurich is responsible for $8m of cover but has doubled the joint cover it provides with other insurers to $300m.

Seven other insurers are listed on the Certificate of Insurance: Liberty Mutual, Energy Insurance Mutual; AIG Insurance Co. of Canada; Stewart Specialty Risk Underwriting; WR Berkley, HDI Global SE of Canada (a subsidiary of Talanx) and Starr. The document is signed on behalf of JLT, an insurance broker acquired by New York-based Marsh & McLennan Companies in April 2019.

Elana Sulakshana, Energy Finance Campaigner at Rainforest Action Network, said: “If insurers are serious about avoiding catastrophic climate change, they must align all business with a 1.5C pathway.

“Any company that claims to care about the climate and human rights cannot insure Trans Mountain while it presses ahead with plans to enable a huge expansion of some of the world’s dirtiest oil and ignores the opposition of First Nations whose traditional lands the pipeline crosses.”

Matt Mace