Sustainable finance

Long-term support for the sustainable development of the economy and building lasting relationships with the Bank’s Customers and other stakeholders is a key dimension of our responsibility.

103-1
103-2
103-3
102-11

TCFD

103-1
103-2
103-3

We offer products and services tailored to the changing needs of our Customers while responding to global challenges and local market conditions.

Commitments of the Bank with regard to economic responsibility – one of the four major areas of our CSR and Sustainability Strategy

Investment and financing with a positive impact
Ethics of the highest standard
Systematic integration and management of ESG (environmental, social and governance) risks

As part of our economic responsibility, we support the United Nations’ Sustainable Development Goals. We are actively involved in initiatives and partnerships for the responsibility of the financial industry and business in general.

UN Sustainable Development Goals supported by the Bank under economic responsibility

In 2021, we continued the implementation of the Fast Forward Strategy for 2018-2021 and its key part – the CSR and Sustainability Strategy. The process was supervised by the Management Board. Simultaneously, in 2021, we were developing a strategy for 2022-2025, with sustainability at its heart. The strategy was published in the first quarter of 2022. The market liability commitments that the Bank implements and that will be reflected in the new strategy include:

An increased share of sustainable financing,
The development of sustainable products and services for Customers (including Sustainability Linked Loans and Bonds, Green Bonds, Social Loans),

The development of best practices in ESG risk management, responsible management, availability and transparency in relations with Customers and partners,
Strengthened partnerships with financial, industry and social institutions to develop standards and solutions in the field of sustainable finance.

We adhere to the highest ethical standards. Therefore, we constantly monitor CSR/ESG risks in the companies we finance. We precede each financing decision with an ESG analysis. We verify how a given company affects the environment, society and governance before reaching financing decisions. We pay particular attention to financing sectors that are considered sensitive in terms of ESG factors.

Further details regarding ESG issues can be found in the Management Foundations chapter and within the present chapter.

ESG criteria in Customer assessments

102-11

TCFD

In line with the Policies of the BNP Paribas Group, the Bank has identified nine sensitive sectors based on environmental, social or corporate governance risks:

These sectors are:

coal-based energy
mining
defence and security
forests – wood pulp
forests – palm oil

nuclear energy
agri-food
tobacco
fuel – unconventional oil and gas

In each of these sectors, the Bank implements CSR Policies and Guidelines concerning the relevant Customers. All current and potential Customers of the Bank who operate in the above-mentioned industries are informed about our CSR Policies. To become our Customer or obtain financing, an entity needs to meet several requirements set out in the Policy for a given sector.

Regarding the most harmful sectors, the Bank makes strategic withdrawal decisions to cease serving Customers.

In 2018, the Bank began the process of exiting the tobacco sector. This is in line with the 2017 global decision of the BNP Paribas Group to discontinue financial and investment activities with regard to tobacco manufacturers, planters and wholesalers.

In 2020, the Bank stopped financing the fur farming sector, which was the final stage of implementing restrictions that had gradually been introduced since 2017.

Also in 2020, the Group tightened its policy towards Customers whose businesses rely on coal-based energy. This was a continuation and extension of restrictions introduced in 2015.

In addition to the regular analysis of risks in particularly sensitive sectors, an ESG risk assessment is carried out as part of the lending process to corporate clients from 2019. All participants in the credit process assess ESG risks, including the CIB and Corporate Clients Risk Division as the second line of ESG risk control. The process has been systematised and made more detailed through the implementation of the EBA/GL/2020/06 guidelines for lending and monitoring.

From June 30, 2021, financing decisions are reached with the aid of an ESG risk assessment, which has become a part of the credit risk assessment process for corporate and SME Customers. From September 1, 2021, an ESG risk assessment is also required for Micro Customers. The ESG assessment (based on information provided by Customers) is included in the credit analysis. If a high level of ESG risk is identified, it is possible to lower the Customer’s rating.

The BNP Paribas Group has in place the Equator Principles (EP) to identify, assess and manage the risks associated with the financing of a project and its environmental and social impact. The principles provide minimum standards for conducting project due diligence.

In 2021, the Bank conducted 174 CSR analyses in sustainability-sensitive sectors.

Restrictions on cooperation with Customers operating in the coal sector have been in place since 2015 due to BNP Paribas Group’s commitment to cease financing the industry by 2030 (in OECD countries, by 2040 in other countries). In 2020, the Group decided to introduce further restrictions on cooperation with companies producing coal-based energy.

BNP Paribas has committed not to commence cooperation with new Customers if coal-related activity generates over 25% of their revenues.
The Bank will only cooperate with companies involved in coal-electricity production if they aim to reduce the share of coal in their energy production processes and possess a strict schedule to eliminate (entirely) the company’s ownership or operation of coal plants/capacity by 2030.
The Bank will not provide products or financial services for new projects based on coal energy, irrespective of their location. The same principle applies to the modernisation of degraded projects aimed at extending the operations of coal-based power plants or increasing production capacity.
The policy applies to Customers of all segments and to all products and services.

The mining sector provides essential resources for most sectors of the economy. However, it is associated with specific environmental, social and governance risks. These include water use and quality, waste generation, air pollution and greenhouse gas emissions, soil degradation and biodiversity impacts, human rights impacts, as well as governance and wealth-sharing issues. Our Policy contains criteria that must be met by mining enterprises and projects.

Additionally, in 2020, the Group introduced further restrictions applicable to Customers who rely on coal-based energy:

The Bank will not provide any financial products or services to infrastructure companies significantly involved in the coal industry, including:
- ports or terminals in existing ports;
- companies involved in the rail and road transport of coal; companies operating in the field of coal storage.
- The Bank will not offer any financial products or services to entities trading in coal fuel.
The Bank will not provide any financial products or services to entities belonging to mining groups that:
- produce more than 10 million tonnes of coal fuel per year, or
- obtain over 20% of their revenues from coal fuel.

The defence and security provisions listed in our Policy apply to weapons (including controversial weapons), military equipment, dual-use goods for internal repression, internal security and police. The Policy defines a set of principles and guidelines regarding the defence and security sector that must be followed by all organisational units of the Bank.

The demand for paper products will increase in the coming decade, which will affect global development. In connection with the wood pulp production process, the Bank has noted that heavy industry has a significant impact on the environment (including water, soil and air pollution), but also on the health and safety of those employed by the industry and surrounding communities. Based on the paper production chain, shareholders believe that the greatest impact can be exerted at the level of forest management and wood pulp production. The Bank’s CSR Policy focuses on these two stages.

The development of palm oil plantations may adversely affect local communities, climate change and the ecosystem. As a financial institution, the Bank wants to support responsible producers who apply sustainability practices in the palm oil production sector. Therefore, we refrain from financing or investing in enterprises that contribute to deforestation or enterprises that violate local communities’ rights.

As a financial institution, the Bank offers its products and services to government units that support the development of non-military nuclear energy. The Bank believes that the international community and countries that plan to develop nuclear power or build new power plants need to act according to the requirements of safety and population protection as well as environmental protection. The Bank’s CSR Policies aim to ensure that the projects financed by the Bank in the nuclear energy sector are adequately monitored in terms of mitigating social and environmental risk.

The Bank is committed to supporting real economy and therefore provides a wide range of financial products and services to the agri-food sector, including all links of the value chain. The Bank’s partners are highly responsible and committed to producing healthy and safe products that do not endanger the food supply for future generations. The sector policy reflects the Bank’s commitment to supporting sustainability.

In February 2021, the BNP Paribas Group defined a new, strict policy to combat deforestation in the Amazon and Cerrado regions. For more information on the BNP Paribas Group’s Sector Policies, visit https://group.bnpparibas/en/financing-investment-policies

In 2021, the Group introduced new criteria for soy and beef production companies in the Brazilian Amazon and Cerrado regions. The Bank will only offer financial products and services to companies that have adopted a zero-deforestation strategy for their production and supply chains that will become fully effective by 2025 at the latest. Specifically:

The Bank will not finance customers producing or purchasing beef and soybeans from areas cleared or converted after 2008 in the Amazon region. In the case of the Cerrado region, the Bank will not finance customers producing or purchasing beef and soybeans from areas cleared or converted after January 1, 2020, in line with global standards;
The Bank will require full traceability of beef and soybean supply chains (direct and indirect) from all customers by 2025.

The Group expects its Customers to:

start assessing the risk of deforestation,
transform their beef and soybean supply chains,
implement monitoring systems for their direct and indirect beef and soybean supply chains from Amazon and Cerrado,
implement supplier involvement programmes to promote a zero-deforestation strategy,
exclude suppliers that violate a zero-deforestation strategy,
regularly inform the Bank of the progress in transforming their beef and soybean supply chains,
periodically report to the Bank on progress in deforestation-free beef and soybean production,
prepare requirements for their suppliers and procedures to be followed in the event that suppliers fail to meet those requirements. The Bank expects Customers to make the requirements and procedures available upon request.

In addition, the Group encourages Customers to transition to cage-free infrastructure for broilers and laying hens by 2025. We also promote the implementation of the Responsible Minimum Standards of the FARMS Initiative. The document encourages all companies involved in breeding chickens (broilers and laying hens) to comply with the maximum stocking density of 30 kg/m2.

The Bank is highly involved in the energy transformation. Our goal is to contribute to the reduction of carbon dioxide emissions. This aim is reflected in the Bank’s loan portfolio and steps taken to reduce the environmental impact of its operations. Therefore, the Bank has developed a coherent policy on financial products and services for the oil and gas industry in the field of unconventional oil and gas.

The Bank will not offer financial products and services to enterprises that use unconventional oil and gas resources.
The Bank will not finance unconventional oil and gas exploration and production projects.
The Bank will not finance entities that engage in activities related to unconventional oil and gas resources, including entities involved in trading, transport and transmission.

In addition, the Bank adheres to the following Policies of the BNP Paribas Group:

The Ocean protection policy defines criteria for the funding of enterprises that might affect the environment and ocean biodiversity. The BNP Paribas Group actively supports initiatives based on a sustainable economy that respects marine ecosystems and human beings.
The Human Rights policy sets the ethical standards of the BNP Paribas Group. The BNP Paribas Group protects human rights. It ensures that they are respected globally in all the Bank’s activities.