BNP Paribas rethinks ESG, focusing on profitable sustainable finance

US-led political backlash pushes bank ESG back

BNP Paribas will focus on four themes of sustainable finance

Bank survey finds people want thematic investing

LONDON, Jan 24 (Reuters) – BNP Paribas is rethinking sustainable finance to focus on profitable deals and redefining the concept of sustainability, a senior executive said, becoming the latest bank to turn away from the ESG label ‘s bank.

Constance Chalchat, chief sustainability officer at the French bank’s corporate and institutional banking (CIB) unit, said the shift was about ensuring sustainable finance does not come at the expense of profitability.

After the initial enthusiasm for environmental, social and governance (ESG) investing, subpar returns prompted widespread rethinking.

Anti-ESG activists have been boosted by US President Donald Trump’s return to the White House.

In his first days in office, Trump pushed back on ESG areas such as diversity. On Thursday, he accused Bank of America and JPMorgan Chase of not doing business with conservatives.

Chachat said the bank wanted to stick to investments related to a sustainable future and help businesses and society adapt to climate change, but it needed to ensure returns for investors.

“We want to maintain long-term relevance, even for U.S. investors, and realign profitability and sustainability,” Chalchat said.

Many big banks have reassessed their climate financing strategies in the face of political pressure, especially from conservative groups in the United States, and the need for energy security in the wake of Russia’s invasion of Ukraine.

Global banks have withdrawn from one of the industry’s main climate alliances in recent weeks, prompting criticism from campaigners who fear the industry has lost its resolve to take action on fossil fuels. BNP Paribas remains a member of the alliance.

The prevailing sentiment contrasts with the excitement over ESG in the wake of the COVID-19 outbreak, when oil prices were hit by a collapse in demand and energy majors turned to renewable energy investments.

BNP Paribas has been working to be a leader in aligning its operations with the goals of the Paris Agreement and last year said it would stop arranging bond transactions in the oil and gas industry.

Going forward, BNP Paribas’ corporate and institutional banking will focus on four themes – adaptation, transformation, protection and social resilience, Chalchat said.

It will support companies and promote investment opportunities for future financial growth and positive contributions to the planet and society, she said.

It would also expand the definition of sustainability to include efforts to decarbonize high-emissions industries such as cement and steel.

This means increasing investment in areas such as water, agribusiness and adaptation finance, she said, while moving away from a general exclusion framework that excludes entire sectors and risks underperformance.

“We believe these things, in addition to the actions needed to rejuvenate the planet, can really drive financial results,” Chalchat said.

She said a survey of investors by the bank last September found that more than half of equity investors expected to focus more on topics such as renewable energy, water and health and wellbeing. (Reporting by Virginia Furness; Editing by Paritosh Bansal and Barbara Lewis)