BNP BNP Paribas

By Noemie Bisserbe and Sarah Kent 

PARIS -- French lender BNP Paribas SA said Wednesday it will no longer finance shale and oil sands projects, in one of the clearest signs yet the banking industry is re-evaluating its relationship with the oil sector amid mounting pressure from investors and top financial institutions.

France's largest listed bank said it would stop working with companies whose main business is the exploration, production, distribution or marketing of oil and gas from shale or oil sands. BNP Paribas won't finance oil or gas projects in the Arctic region either, the bank said.

"These measures will lead us to stop financing a significant number of players that don't further the transition toward an economy that emits less greenhouse gas," BNP Paribas chief executive Jean-Laurent Bonnafé wrote in a post on LinkedIn published Wednesday.

BNP Paribas is one of the first banks to eschew parts of the oil sector. Many governments are taking steps to curb emissions and investors have been increasing pressure on companies over their environmental footprints.

Earlier this year, a panel of top financial institutions and companies led by Michael Bloomberg published a series of guidelines pushing for companies to disclose more about the impact of climate change on their businesses.

"I think personally the writing is on the wall over the medium-term for the most carbon-intensive fossil fuels," said Mark Lewis, a member of the panel. It is backed by the Financial Stability Board, a body that makes recommendations to the Group of 20 nations about financial regulation and policy.

"The banks will adapt like all other companies to changing economics and changing investor preference," Mr. Lewis added.

Exxon Mobil Corp. faced a shareholder revolt this spring as investors ignored management recommendations and voted in favor of a resolution calling for more information on how climate change and regulation could affect the company.

Still, there is little sign that the industry is facing difficulty raising money. The shale oil sector has boomed over the last three years, despite a steep drop in oil prices. Most shale developments are in the U.S. where the Trump administration has rolled back tougher environmental regulation. U.S. companies also have access to a deep pool of investors and banks.

BNP Paribas has already made moves to reduce its financing of coal mines and coal-fired power plants and expand its investment in renewable energy. Earlier this year, BNP Paribas said it won't finance coal energy sector companies that aren't seeking to diversify their energy sources.

Weeks before the COP21 climate change conference in Paris in December 2015, the bank pledged to increase total financing for renewable energy to 15 billion euros ($17.7 billion) and set aside EUR100 million for investment in startups working on solutions for energy transition.

It is now turning its back on some of the more contentious parts of the oil sector. Oil from tar sands like those in Canada have long faced criticism because of their high carbon intensity compared with more conventional oil sources. Many large oil producers like Royal Dutch Shell PLC have sold oil sands assets in recent years as falling prices made their economics less attractive.

Extraction of shale oil and gas has also faced wide-ranging concerns about its environmental impact and the technique of extracting oil and gas by fracking has been banned in parts of Europe, including France.

A BNP Paribas spokeswoman declined to comment on the bank's exposure to shale and oil sands projects, but analysts estimate that it is limited.

The bank's credit risk exposure to energy excluding electricity was of EUR30.4 billion as of December 31, 2016, according to corporate filings.

Write to Noemie Bisserbe at noemie.bisserbe@wsj.com and Sarah Kent at sarah.kent@wsj.com

(END) Dow Jones Newswires

October 11, 2017 10:15 ET (14:15 GMT)

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