Harnessing collaboration and ESG data to scale up sustainable finance

Ensuring finance supports companies, investors, and communities in tackling critical climate, biodiversity and social challenges is essential to accelerating sustainable development. On being awarded the World’s Best Bank for Sustainable Finance, alongside other prestigious Euromoney Awards for ESG data and public sector, we unpack BNP Paribas’ perspective on the Bank’s role in addressing key challenges facing the economy and society, especially in the harnessing of ESG data and collaboration to scale up sustainable finance.

Net-zero in action

In April 2021, BNP Paribas became a founding member of the Net-Zero Banking Alliance (NZBA) committing to reach net zero emissions by 2050. Ensuring a science-based transition with interim targets is vital in the evolution towards net-zero. This has included an interim commitment to reduce BNP Paribas’ credit exposure to oil and gas exploration-production activities by 10% by 2025. Policies also matter and the Bank has consistently been tightening its funding criteria for fossil fuel related activities and no longer accepts new customers with a coal-related revenue share of more than 25% and in 2020 adopted cut-off dates beyond which its electricity-producing customers will no longer be able to receive financing for coal.

Managing climate risk through harnessing ESG data is another key lever in ensuring a measured and managed transition.  Since December 2018, BNP Paribas (with a handful of other large banks) developed a common open source methodology (PACTA) for aligning loan portfolios with the Paris Agreement. The open source aspect is important in the approach taken on transition, and has been done in coalition with the 2° Investing Initiative (2°ii). The sector specific scope is another key aspect of PACTA, and covers high emitting GHG sectors including utilities, automakers, oil, gas, and power generation.

BNP Paribas has taken a different approach. Not only has the French bank put data at the heart of its sustainable finance strategy and devoted substantial resources to developing its data collection and processing capabilities, it has also committed to making it open source and publicly available

Euromoney editor

Innovation supporting the real economy

As governments, companies, investors and society at large grapples with the ongoing Covid-19 crisis, climate change, biodiversity loss, and social issues, the Bank has looked to mobilise its people and expertise in sustainable finance to find innovative approaches to addressing these challenges. A key area of development for the Bank has been the integration of ESG data into capital markets, notably the Bank’s leadership in developing the sustainability linked finance market across bonds, loans and derivatives. Across a spectrum of sectors, the Bank’s teams have supported a tangible sustainability transformation in the real economy, including:

Retail – In Dec 2020, BNP Paribas acted as sole Sustainability Coordinator on a £2.5bn RCF linking to UK retailer Tesco’s targets on scope 1 and 2 GHG emissions, percentage of renewable energy sourced/produced and on food waste redistribution. In Jan 2021, the Bank then acted as joint sustainability structuring advisor & joint bookrunner on Tesco’s €750mn 8.5- year SLB in which the coupon is tied to Tesco’s scope 1 and 2 GHG emissions targets.

Household appliances – Whirlpool Corporation, a leading kitchen and laundry appliance companies, is connecting how daily tasks such as cooking and cleaning can contribute to a more sustainable future through innovative financing with its first-ever Sustainability Bond. The $300m, 10- year issuance launched in late April is the first sustainability bond from a US-based appliance firm and is latest milestone on a sustainability journey that goes back 50 years. BNP Paribas served as the sole Sustainability Structuring Agent as well as an active bookrunner on the transaction, which generated strong investor interest.

Social Housing – BNP Paribas was sole arranger and sustainability coordinator on a £50mn sustainability-linked revolving credit facility with Metropolitan Thames Valley (MTVH). The 3 year facility is the 1st Risk Free Rate (RFR) SLL in the social housing sector. Margin is tied to MTVH’s environmental targets on reducing GHG emissions linked to energy consumption from both its offices and transport, as well as its residential portfolio.

Shipping – BNP Paribas teams supported the 1st ESG SONIA swap repack: Associated British Ports (May 2021) – 30-year transaction was the 1st SONIA-linked interest rate swap institutional repack and the 1st institutional repack transaction to have a sustainability-linked KPIs discount is offered to ABP on its hedging rate (provided it meets Scope 1 and Scope 2 emissions reduction KPIs by 2030). This builds on a 36% reduction achieved in absolute GHG emissions since 2014.

Development banks – In April 2021, Scotiabank Mexico launched a pesodenominated structured note linked to IndexAmericas Top 50, a corporate sustainability index developed by the Inter-American Development Bank Group (IDB) and structured and commercialized by BNP Paribas. The groundbreaking index includes 50 US-listed companies with strong commitments to sustainable development and environmental, social and governance (ESG) issues, as well as a sizeable footprint in Latin America and the Caribbean (LAC). The note reflects how collaboration between the public and private sectors can foster sustainable development in the regions in which they operate.

Blue economy solutions – Bank of China (BOC) marked a major milestone with Asia’s 1st blue bond issue, the 1st blue bond from the private sector, and the 1st blue bond from a commercial bank. The $942.5mn-equivalent debut was split between a 3y $500mn tranche and a twoyear CNH (offshore Chinese yuan) 3 billion tranche. The proceeds of blue bonds support ocean conservation by financing marine and ocean-based projects with environmental and economic benefits. BNP Paribas’ role as Joint Global Coordinator and Joint Lead Manager on this deal demonstrates leadership of the sustainable bond market innovations in APAC.

Governments – BNP Paribas was joint bookrunner on the Italian government’s €8.5bn 24-year green Buoni del Tesoro Poliennali. The green BTP which supports the EU’s transition to net zero by 2050 was over 9 times oversubscribed, showing strong investor appetite for the country’s transition strategy.

Collaboration with experts

Partnerships with experts at the forefront of understanding ESG challenges, and collecting data is an essential part of BNP Paribas approach, and has been a longstanding aspect of how the Bank has become a leader in sustainable finance. This includes scientists and data experts who have access to ESG modelling including climate data, engineers and technicians who understand the energy transition, and academics and communities addressing sustainable development issues. Key coalitions include:

• BNP Paribas Foundation Climate & Biodiversity Initiative: BNP Paribas Foundation accompanies international research teams studying past climates, ocean acidification or permafrost thaw. Since 2010, the BNP Paribas Foundation has been supporting this type of scientific research. Since inception, the BNP Paribas Foundation has invested € 12mn in scientific research projects through this tailor made programme.

• OS-Climate: In 2021, the Bank joined OS-Climate as a founding member. This coalition is a collaborative and non-profit platform hosted by the Linux Foundation and aims to develop open data, and open source analysis for climate risk management and climate aligned finance, investing and regulation.

• Team Umiaq GROUNDTRUTH Global Arctic sailing expedition: This year our sustainable finance expert Sarisher Mann joined the Team Umiaq GROUNDTRUTH Global sailing expedition from Iceland to Greenland across the Ocean to engage and learn from a diverse range of experts on biodiversity, climate change, and sustainable development areas.