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Two big European banks walk away from oil and gas bond deals

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Two of Europe’s major banks have pulled out of oil and gas bond deals, avoiding a type of financing that large fossil fuel companies have become increasingly reliant on.

BNP Paribas and Crédit Agricole, Europe’s second and third largest banks by assets, have told their shareholders they will no longer underwrite bond issues for the sector unless they include green restrictions, clarifying their existing policies.

HSBC, Europe’s largest bank, agreed earlier this year to begin disclosing its carbon footprint linked to such issuance, but has not yet applied this type of climate restriction to general-purpose debt agreements.

The pressure on banks to make their lending and underwriting portfolios more climate-sensitive is particularly high in France. Senior bosses, including the chief executives of BNP and Crédit Agricole, have appeared at hearings held in the Paris Senate on the activities of oil and gas group TotalEnergies, including its climate impact.

Global banks have generally reduced financing for oil, gas and coal projects since pledging at the UN COP26 climate summit in Glasgow in 2021 to limit lending for fossil fuel expansion.

But they have been slow to extend their policies to other core activities, such as general-purpose lending to oil and gas companies, or the underwriting and facilitation of bond deals.

In January, Crédit Agricole participated in a €1 billion bond deal for Italian oil and gas company Eni. “This type of bond deal cannot happen in the future as a consequence of our strategy,” the bank told the Financial Times on Thursday.

The two French banks are among global lenders that underwrote more than $270 billion in corporate bonds for fossil fuel companies last year, almost $30 billion more than the year before, according to an analysis by advocacy groups. campaign coordinated by Rainforest Action Network. Loans to those companies fell overall in the same period.

The decisions on the bond deals promised to be a “sign of real change”, said Lucie Pinson, director of the French campaign group Reclaim Finance.

Crédit Agricole said it was no longer participating in “non-specific bond issues” that did not respect its framework for issues intended for green projects.

Last week, BNP Paribas said in a statement prepared ahead of its own annual meeting that it would not participate in “conventional” bond deals for the oil and gas sector.

BNP said it “reserves” the ability to “act in the service of financing the energy transition.”

Both banks’ policies leave the door open to bonds that raise money for green projects, as well as deals with issuers that are part of the fossil fuel supply chain without producing oil or gas themselves.

The measures come as banks globally have for the first time begun to disclose information about the carbon footprint of their capital market deals. This was an area that investors had previously considered a climate blind spot.

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