Crédit Agricole has begun phasing out financing of the coal industry as part of a comprehensive plan to overhaul its investment policies towards fossil fuels and finance more renewable energy projects.
The French bank’s new group climate strategy was launched earlier in June and aims to align the whole of Crédit Agricole with the United Nation’s Paris Agreement timetable for reducing carbon emissions by 2022.
Eric Campos, head of societal and environmental responsibility at Crédit Agricole, tells GTR that the end goal of the strategy is to stop working with corporations currently developing or planning to develop new thermal coal capacities along the entire value chain, including mining, production, utilities and transport infrastructures.
Crédit Agricole’s climate strategy is comprised of three pillars. The first involves the creation of a dedicated governance structure to define and manage the implementation of the plan. The governance will include three bodies: a societal engagement committee of the bank’s executive managers; a scientific committee made up of experts in charge of conducting high-level scientific analysis with the support of academic partners; and an information system designed to inform the bank’s work and decisions on its climate strategy consistently.
Furthermore, an independent third-party body will audit and certify the proper implementation, oversight and transparency of the group climate strategy.
The second pillar involves the gradual reallocation of loans, investments and assets under management portfolios away from coal. According to Crédit Agricole, the reallocation will be guided by the scientific committee and “aligned with the world energy mix”, which represents the breakdown of fuels used to create electricity.
As part of its increased focus on green energy, Crédit Agricole has set a target to finance a third of renewable energy projects in France by the end of 2022. The bank estimates that it is currently financing 25% of this market, according to a bank spokesperson.
The global investment bank arm of the Crédit Agricole group also aims to double the size of its green loan portfolio to €13bn by 2022.
Meanwhile, the bank will, as of this year, reduce its exposure to coal-related businesses by no longer developing business relations with corporations generating more than 25% of their turnover in the thermal coal sector. For those companies with a relative coal threshold of more than 25%, the bank will only authorise loans dedicated to renewable energy or greenhouse gas reduction projects and to companies that demonstrate a commitment to reducing their carbon footprint.
The bank says the exposure of its portfolios to the coal industry will be fully phased out by 2030 for EU and OECD countries, 2040 for China and 2050 for the rest of the world. This timetable is based on research by Climate Analytics, a research firm that supports the aims of the Paris Agreement.
Finally, the third pillar will see the incorporation of energy transition goals into customer relations and will include the implementation of a ‘transition scoring’ system to measure clients’ “contribution and capacity to adapt their business model to the challenges of achieving the energy transition and combating climate change”, the bank explains in a statement.
By 2021 companies must provide a detailed phasing out plan of their coal-sector mining and production assets, in accordance with the 2030/2040/2050 timetable, depending on where these assets are located.
The bank says the transition scoring system will supplement its existing financial scoring for clients and give it a better-rounded picture of their business case. The new system will be applied to large corporates starting in 2020 and possibly extended to smaller businesses following an overall assessment.
“The consolidation of a transition scoring will allow us to assess properly the potential effects of climate change on our financing portfolios and to design climate stress tests in accordance with different transition path scenarios all the way to 2050,” the bank explains.
The new commitments will build upon the bank’s existing climate-focused initiatives, which include a €200mn investment fund focused on supporting French small and medium enterprises (SMEs) with the transition of energy, agriculture and agri-food systems. The fund was launched in February and offers SMEs financing of between €1mn and €20mn over a period of five to 10 years in co-investments with one of the Crédit Agricole group’s regional private equity companies.
The bank’s subsidiary Unifergie, meanwhile, is dedicated to renewable energy financing in France. As of December 2018, it had signed €571mn-worth of finance deals to support multiple renewable energy projects, according to a spokesperson.
Crédit Agricole also stopped financing offshore drilling around the Arctic in 2012 and ceased offering project finance in the mining and coal-fired power industries in 2015. It has also been offering structuring and investing in green, social and sustainability bonds since 2012.