Banks across Europe and elsewhere in the world should brace themselves for having their climate policies challenged in court after French bank BNP Paribas last week became the first commercial bank to find itself confronted with a lawsuit because of its support to fossil fuels and for contributing to climate change.
Speaking in Luxembourg, officials at the European Investment Bank, which has already stopped financing fossil fuels, said more banks will need to brace themselves for legal challenges over their climate policies. At this week’s EIB Forum, financing climate mitigation emerged as a major talking point. “Even before the first tanks rolled across the border, cutting our dependency on fossil fuels was necessary to stave off climate disaster,” EIB president Werner Hoyer said on Monday.
Paris-based representatives of Friends of the Earth, Notre Affaire à Tous and Oxfam last Thursday initiated legal action against BNP Paribas. The three NGOs said BNP Paribas, as Europe’s largest and fifth worldwide funder of fossil fuel expansion, needs to immediately stop financing this expansion and to adopt an oil and gas exit plan.
Net Zero Banking Alliance
«The urgent warning professed by the scientific community and the International Energy Agency has recently been reiterated through repeated statements from the United Nations: a bank cannot claim to be committed to net zero while supporting new oil and gas projects,” said Lorette Philippot, Campaigner at Friends of the Earth France, in a statement. “But BNP Paribas, Europe’s largest funder of fossil fuel expansion, is ignoring scientific truths and is reluctant to address this glaring issue.”
BNP Paribas, a member of the global Net Zero Banking Alliance, said it regretted to see that the NGOs decided to “engage in litigation rather than dialogue”. In its response the French bank said it remains “convinced that the ecological transition is the only viable path for the future of our economies, We are focused on our fossil fuel exit path, accelerating financing for renewable energies.”
European Investment Bank vice president Kris Peeters said the BNP case shows that banks cannot afford to ignore climate investments. “NGOs will try to hold them to account more often,” he said, speaking earlier to journalists in Amsterdam, as reported by Dutch daily FD.
As a major source of financing in Europe, the EIB, with 72.5 billion in outstanding loans, is trying to set an example. It no longer finances fossil fuel projects and more than half of its loans goes to climate projects.
“The EIB was the first international financial institution to stop financing unabated fossil fuels altogether. Now, everyone realises that the green transition is also a critical security imperative, the foundation of a sustainable and inclusive growth model for the EU and the world as a whole,” Hoyer said.
’Duty of vigilance’ law
The three NGOs first issued a formal demand to BNP Paribas last October. They now have filed a lawsuit at the Paris Judicial Court under the French duty of vigilance law - devoir de vigilance - for continuing to finance the oil and gas sector.
«The French duty of vigilance law imposes an obligation on multinationals in all sectors to take action to protect human rights and the environment, and to do so efficiently,” said Justine Ripoll, campaigner at Notre Affaire à Tous. “The financial sector has a huge responsibility in our collective ability to comply with the Paris Agreement. This first climate litigation against a commercial bank is undoubtedly the first of many around the world.”
Seattle Avocats partner François de Cambiaire said French law aims to exert strict judicial control on the company’s compliance with its duty of vigilance. “The court will rely on UN and OECD guidelines, which define specific due diligence measures regarding the activities the bank supports through its investments and financing efforts. This can go as far as the cessation of the activity causing the damage, and even divestment.”
Less financing for low-carbon projects
A new study released on Tuesday made clear that the biggest financiers of the world’s energy supply — many of which happen to be members of the Net Zero Banking Alliance — are a long way from meeting their commitments. BloombergNEF analysts calculated that the majority of banks in the alliance have provided less financing for low-carbon energy companies and projects than they have for planet-warming fossil fuels.
The financing goal is for a 4-to-1 ratio — with the 4 being the low-carbon part — to be reached by 2030. At the end of 2021, their average ratio was 0.92 to 1, according to BloombergNEF.