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French banks committed to the climate – Interview with Etienne Barel, Deputy CEO of the FBF

Etienne Barel

As COP 26 gets under way, from 1 to 12 November 2021 in Glasgow, FBF Deputy CEO Etienne Barel gives us an overview of the energy transition and the commitment of French banks to the climate.

  • Are French banks fully committed to combating global warming?

There are no two ways about it. French banks are deeply committed to fighting for the climate, and have made the energy transition a strategic priority in an effort to meet the goals of the Paris Agreement.

It thus goes without saying that French banks fully support scientific studies and reports published by the international authorities on the climate.

We need to be taking action in all business sectors and economic activities. For us, the transition will only be successful, sustainable and global if it is also inclusive and socially responsible. If tomorrow we decided to completely stop financing any projects that are not already ecologically neutral, it would have massive consequences on the daily lives not only of our citizens, but also for many companies and professionals. We can’t just suddenly stop funding our economy, which still generates carbon but is very much headed in the right direction. What we can do, however, and what we are trying to do, is turn our attention to high-emission sectors and define pathways to converge towards a low-carbon economy.

  • The first commitment made by French banks was to stop financing companies in the coal sector. Could you give us an update on how we’re doing on that score?

As I was telling you, you have to start with the industries that pollute the most. That’s why French banks started with coal. I want to stress that French banks were the first to take a position on the industry, back in 2011. As of 2019, they no longer finance new coal-fired plants or thermal coal mining operations. Since then, they have introduced the most advanced coal exit strategies in the world. Not only have they established demanding policies on changing the “energy mix” of their customers, but they are also helping electricity producers with their energy transition and are among the only ones calling for coal exit plans with specific deadlines. The results speak volumes: according to the latest data, funding for companies involved in the coal sector represented just €2.1bn, i.e. 0.16% of the corporate loan book of French banks, at end-2020. To date, I believe French banks are still the only ones to have made such a commitment collectively: they are pioneers, but we would be thrilled to see them joined by other financial centres.

  • After coal, the six major French banks recently announced new commitments on financing for unconventional hydrocarbons. Could you tell us more about that?

Yes, just a few days ago the six major French banks announced that, starting in January 2022, they will no longer finance dedicated projects or corporations generating more than 30% of their business from exploration and production (shale oil, shale gas and oil sands). This is yet another step forward, the first of its kind in the world, one that reflects the determination of French banks to lead the way in a global, sustainable and responsible transition. We hope this will have a faster domino effect than our commitment on coal. Once again, we are determined to address the major challenge of climate change and will remain determined. However, if we’re the only ones in the world fighting the fight, it won’t be enough. That’s the reason behind what we tell our various contacts during our discussions.

  • In a bid to ramp up the transition, it is important not only to reduce financing for high-emission energies, but also to accelerate renewable energy finance. How are we doing on that front?

A successful transition is a gradual transition. It’s part of the definition. And, to that end, we need to help our customers give up high-emission energies such as coal and unconventional hydrocarbons. It’s also important to understand that discontinuing high-emission energies, while providing companies and citizens with adequate living conditions during the transition phase, can result in a temporary increase in the use of lower-emission but not completely neutral energies.

Renewable energy finance totalled more than €44.3bn in 2020, a 68% increase in 4 years. All viable projects aimed at protecting the environment can obtain funding. Four French banks were in the Top 10 on the global market for renewable energy finance in H1 2021

  • How do you respond to those who say that these are just drops in the bucket, criticising French banks for not doing enough or moving fast enough?

Clearly this is an urgent matter, and we all need to move faster, and keep moving faster every moment to build a low-carbon economy. We have the same ambition and the same goals as those who want to achieve the targets of the Paris Agreement.

If we want to succeed in making this change last, our role is not only to be pioneers, which we are, but also to bring all of society and all our customers with us on this journey. That kind of effort takes time, because we can’t change an economy that has been carbon-based since the Industrial Revolution overnight. Our common goal is to play this role while being united with all stakeholders to accelerate the transition together. 

  • Who are the other stakeholders you’re working with on the energy transition?

I’ll say it again: for the transition to be sustainable, it must be global. So we are working with all stakeholders on the transition. With our individual and corporate customers alike. From VSEs/SMEs to very large corporates. Depending on the individual situation, we advise them on their short, medium and long-term prospects. Our role is not just to provide funds, but to provide support through personalised advice on how to handle the transition by implementing new business models, new production processes and new opportunities. We also work with NGOs, which is very constructive not only because of their ambition, but also because they are helping guide society as a whole towards a low-carbon economy. We work with regulatory and supervisory authorities, which play a key role, and we take part in various collective initiatives and task forces dedicated to improving climate risk management. We also participate in pilot climate programmes and consultations. In short, we work with everyone that can join us in accelerating the transition for the climate.

  • And how do you respond to accusations of greenwashing?

That’s no longer an issue. We have proved that banks have made a genuine, transparent commitment for the climate, and we think it’s a good thing that the government authorities – particularly European authorities – are normalising these efforts. Green taxonomy, as complex and imperfect as it is, is a first good step in that direction. But there’s still a long way to go. For example, right now there is no unified methodology for measuring the impact of financing on the climate. We are still in the “research and development” phase, with many avenues being explored by each French bank, calling for major investments depending on its activities in order to measure its impact and alignment.  Even if the measurement of this impact and alignment is not yet standardised, each bank is still working hard to make improvements in this area. It’s a huge undertaking, and it’s important to understand that behind these methodologies, banks are in the process of completely transforming their business model…

  • But can banks do more?

Yes. Obviously! We believe this even more, each and every day. We can and we will continue to do more. But we will do more while supporting all our customers as they make their own individual transition. By working for an inclusive, socially responsible transition, one that is global and sustainable, and thus successful. 

Shale oil, shale gas and oil sands: the six largest French banks focus their efforts on unconventional hydrocarbons

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