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BNP Paribas commits to stop underwriting oil and gas bonds

At its Annual General Meeting, BNP Paribas – a globally systemically important bank (GSIB) and Europe’s fourth largest fossil fuel financier – said it will no longer underwrite bonds issued by oil and gas majors like BP, Shell, TotalEnergies, Chevron, and ConocoPhillips, making it one of the first major banks to commit to stop underwriting oil and gas majors.

This is the first clear rejection of oil and gas bond financing by a GSIB and send a strong signal that banks can no longer hold a neutral position on bonds financing for fossil fuel majors. BNP has underwritten 113 of the outstanding bonds issued by the Dirty 30, many of which will now be excluded in its new policy.

A few gaps remain

BNP Paribas has not said that it is applying its approach for bonds to general loans to companies in the oil and gas sector, even though they are similarly not earmarked and can, in the words of Jean-Laurent Bonnafé the CEO of BNP Paribas, finance ‘anything and everything’. However, the bank points out that general loans represented a tiny proportion of its loans to the sector in 2023 and says that it has ambitious targets for reducing exposure to the oil and gas sector for its lending. In other words, these loans should also be phased out, but BNP Paribas’ involvement in the loan granted to the Italian company Eni last December shows that they are still possible.

Questions also remain concerning sustainability-linked bonds (SLBs), which are bonds associated with climate objectives. These bonds are not conventional bonds and therefore seem likely to continue to be backed by the bank, even if they support the full range of corporate activities, including oil and gas expansion.

There are also concerns about which companies are covered by the decision to no longer participate in new bonds, adopted in February 2023 according to the bank. Three bond transactions with companies producing hydrocarbons which are planning new projects have been supported by BNP Paribas since that date. This could be explained – but not justified – by the fact that these companies are classified as operating in the industrial sector (The Abu Dhabi National Energy Company and KOGAS) or are integrated companies with relatively little activity in oil and gas production (Orlen).

BNP Paribas