ESG Financing House: BNP Paribas

IFR Awards 2023
9 min read
Julian Lewis

Innovation and integrity

For its increasingly unmatched global reach in ESG products – including complex export and project financings and next-generation equity-linked instruments and securitisations – plus its notable stance on fossil fuel and renewables financing, as well as a leading ESG research effort across asset classes, BNP Paribas is IFR’s ESG Financing House.

BNP Paribas in 2023 reinforced its global leadership in ESG financing – founded on its very strong position in the most advanced market, Western Europe – with significant regional progress, structuring innovations and a notable emphasis on integrity.

“In the Americas and APAC we are moving up the ranks and making progress,” said Frederic Zorzi, global head of primary markets. "We're a leader in Europe, but also we are a leading bank in those regions."

The global leadership that this regional push underpins is clearly visible. According to LSEG data, BNPP is both 2023’s top-ranked underwriter of ESG bonds globally and the global number one in sustainable bonds, including unlabelled bonds for companies in sustainable industries.

Strikingly, BNPP also ranks first globally for all three bond issuer types – corporates, financials, and sovereigns, supranationals and agencies – as well as claiming the top position in global ESG loans.

While standard ESG debt is at the core of BNPP’s leadership, breakthroughs such as transition exchangeables, convertible sustainability-linked bonds, ESG share buybacks and sustainability diversified payments rights also contributed to its performance, as did groundbreaking ESG transactions in export finance, project finance, securitisation and derivatives.

“We've been focused over the last few years on making sure the whole financing chain can be made with an ESG element. What is new this year is that the circle has never been as complete,” said Agnes Gourc, head of sustainable capital markets.

Extensive ecosystem

The bank’s global ESG “ecosystem” extends beyond financing. Its broader presence includes advisory, structuring and research, as well as a low-carbon transition group. “That allows us to go deeper,” said Zorzi.

Its ESG research effort spans equities, via its Exane brokerage, credit and markets. Besides thematic research in areas such as transition technology, renewables and biodiversity and a wide-ranging markets podcast, it produced ESG quant tools covering more than 4,500 companies and a materiality map for ESG sensitivity across 30 economic sectors.

It also created research baskets on themes like sustainable agriculture, alternative materials and water scarcity, offering these in both equity and credit versions, and launched a clean energy index on which BNPP sold several structured products.

The advisory group’s assignments included working on ESG ratings in IPOs and spin-offs for companies in the aerospace & defence, automotive, business services, mobility and technology sectors. The group also gave feedback to prospective ESG bond issuers on their frameworks and sustainability performance targets – including conveying BNPP’s unwillingness to participate when these were too weak.

Franck Rizzoli, head of ESG financing advisory, cites a client who noted that BNPP was alone in challenging its plans (described by Constance Chalchat, head of CIB company engagement and global markets chief sustainability officer, as “a very tough position to be in”) but conceded its criticisms a year later.

“You can only do that if the bank strategy at the top level is aligned,” said Gourc.

No new fields

This alignment is evident at BNPP. Having begun exiting fossil fuels as early as 2010 and after stopping financing unconventional oil and gas specialists in 2017, the bank updated its oil and gas policy in 2023 to stop financing new fields.

It is also adopted new targets to reduce the emissions intensity of its financing for the hard-to-abate aluminium, cement and steel sectors.

Chalchat describes this as “very genuine … a very robust commitment”.

These stances add further limits to the mandates the bank can seek – in addition to declining prospective deals when it is sceptical of their credibility.

The bank points to its deal flow as evidence of its commitment to high-integrity deals. As much as 90% of its SLBs reference net-zero pathways determined by the Science Based Targets initiative, compared to the market average of 50%.

Similarly, over half its SLBs that incorporate emissions targets include Scope 3 value chain targets versus the broader market’s 40%, while NGO the Climate Bonds Initiative includes some 80% of BNPP's EMEA region green bonds in its stringent database.

Its ESG and energy bankers also serve on standard-setting bodies such as the International Capital Market Association, where Gourc is vice-chair of sustainable finance principles, the Loan Market Association and Taskforce on Nature-related Financial Disclosures.

The flipside of BNPP’s oil and gas stance is its adoption of ambitious targets for financing transition. It aims to raise €200bn for corporate transitions by 2025 and has committed €40bn to low-carbon energy by 2030.

“What we are trying to do is an acceleration of this transition via financing the right projects,” Zorzi said.

CEEMEA charge

Two new developments were especially notable in BNPP’s home EMEA market. One was its surge in CEEMEA, where the bank powered up league tables as it gained nearly five percentage points of market share.

Standout transactions include working as ESG structuring agent for the inaugural green bond from Hungarian utility MVM and as co-structuring adviser for a green debut from Masdar, the UAE’s state-owned renewables company. BNPP was also sustainability adviser on the latter’s green bond framework, which is aligned with CBI’s Climate Bond Standard.

Another significant development was its progress in ESG versions of equity products like exchangeable bonds and share buybacks. In addition to working on corporate green hybrids like those of Telefonica and Volkswagen, BNPP structured the first transition exchangeable – a €500m bond for Italy's Snam.

In addition, it was a joint global coordinator on French engineering group Spie’s €400m convertible SLB.

The bank was also sole lead manager on an innovative DKr2.6bn (US$380m) share buyback programme for Danish jewellery retailer Pandora with an ESG commitment.

Americas acceleration

Another highlight was the bank’s notable acceleration in the Americas, where BNPP moved up to eighth in the region from mid-teen rankings on both ESG and sustainable bond measures in 2022, according to LSEG data.

Latin American mandates such as the Mexico’s Ps23bn (US$1.36bn) debut domestic sustainable bond and Cemex’s US$1bn green hybrid featured in this push. BNPP was the only non-primary dealer that the sovereign appointed a bookrunner on its “BonoS” offering, while the perpetual non-call 5.25-year bond for Cemex marked the first green hybrid by a cement company and the first LatAm hybrid in nearly 18 months, as well as the Mexican blue-chip’s first green bond. BNPP was also a joint lead arranger on a US$3bn sustainability-linked loan for the company.

Other mandates were as sustainability coordinator and arranger of the first sustainability DPR offering (US$900m for Banco do Brasil); a green loan and ECA coordinator role for a €300m green export finance facility for Brazil’s Raizen; and joint bookrunner for a rare US$500m green SLB for Chile’s CMPC.

BNPP’s Americas push also included domestic US successes. It was sustainability structuring agent for a US$500m sustainability bond for Mars and structured one of two US$350m green securitisations for Solar Mosaic (and was joint bookrunner on the other).

It was also coordinating lead arranger and bookrunner on its first renewables construction warehouse financing in the region – US$2.5bn for AES Clean Energy.

Asian action

Asia, including Japan, saw a similar rise to the Americas, with the firm moving to eighth on the region’s 2023 ESG bond league table from 18th a year earlier and gaining over a percentage point of market share.

Gourc highlighted Port of Melbourne's A$475m (US$303m) SLL, which incorporated a novel reference to Scope 3 emissions.

The bank was also joint sustainability structuring adviser on the first SLB from an Asian tech firm (US$400m for China’s Sunny Optical) and sole green structuring adviser on the first green bond from a South-East Asian sovereign-linked corporate (US$400m for Pertamina of Indonesia).

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