Bank for Sustainability: Societe Generale

IFR Awards 2023
9 min read
Tessa Walsh

Pushing forward

The energy transition picked up pace in 2023 as fears over global energy security outweighed pushback against ESG. For successfully accelerating and embedding the transition across all of its franchise, Societe Generale is IFR’s Bank for Sustainability.

Speeding up the energy transition proved challenging amid difficult market conditions but Societe Generale’s insightful and intelligent approach put it ahead of its peers. The bank introduced a range of new measures and reaped the rewards of initiatives put in place in the past two years.

“We have three blocks: we build, we transform and we accelerate,” said Pierre Palmieri, SG’s deputy CEO. “Each banker is becoming an ESG banker and we embed ESG matters in all our businesses.”

Acceleration requires a focus on innovation and new frontiers – in areas such as natural capital, water scarcity and the circular economy – as well as decarbonising the bank’s existing businesses and acting responsibly as a bank and employer.

SG’s new management team presented the bank’s 2026 strategic plan in mid-September, which included announcements on fossil fuels that NGO Reclaim Finance said made SG one of the most advanced banks in terms of climate change by treating gas the same way as oil.

“We will accelerate the decarbonisation of our businesses and work closely with our clients and partners to maximise our positive impact at the forefront of the energy, environmental and social transition,” said Slawomir Krupa, SG’s CEO.

To speed the decarbonisation of its existing businesses, SG took a decisive step to reduce its exposure to the upstream oil and gas sector by 80% by 2030 compared to 2019 with an intermediary step of 50% in 2025 from the same baseline which was increased from a 20% target.

That was combined with an absolute reduction target for greenhouse gas emissions across the entire oil and gas chain (for Scope 1, 2 and 3 emissions) of 70% by 2030 compared with 2019.

“We have significantly increased our ambitions – 80% by 2030 for oil and gas is one of the most ambitious targets we have seen in the industry, especially for banks of our size,” Palmieri said.

SG also committed to stop financing upstream oil and gas pure players and new greenfield projects and reinforce engagement with oil and gas clients based on their transition ambitions, which has already led to difficult decisions.

“I personally went to meet with the clients that we have decided to exit from our portfolio in order to explain where we’re coming from, as it is important that companies know what is going on in the financing industry,” Palmieri said.

As well as scaling down existing fossil fuel exposure, SG is rotating into new businesses and created a new €1bn transition investment fund with €700m of equity and €300m of debt, which Palmieri sees as one of SG’s most significant achievements of the year.

The fund will finance the emerging leaders of the energy transition in low-carbon businesses such as renewable energy, carbon capture and storage and hydrogen, focus on nature-based solutions to restore and protect biodiversity and provide impact financing for the UN’s Sustainable Development Goals.

“It’s a game changer. It creates a new business model and huge business opportunities. I think it's another avenue that can be extremely profitable because we have invested so much knowledge in expertise – we’ve got a lot of specialists in our bank and we want to leverage this to take more risk,” Palmieri said.

The shift

SG is using industry standards and portfolio targets to shift its business models for all clients to meet its commitment as a founding member of the United Nations Environment Programme Finance Initiative's Net-Zero Banking Alliance to align its portfolios on trajectories aimed at carbon neutrality by 2050 in order to limit global warming to 1.5 degrees.

While this involves addressing the most carbon-intensive sectors as a priority and setting intermediate reduction targets, SG is also developing new and less conventional ways to finance the growing capex needs for the transition.

Palmieri helped to launch a major transition programme called “The Shift” in 2021 that looked at relevant decarbonisation or low-carbon solutions for different value chains which are now being put into motion for clients – and yielding results.

“Everything that we started to envisage through The Shift is taking shape in one form or another now and it started this year,” said Hacina Py, chief sustainability officer.

The plan relies on developing strong links with entrepreneurs by leveraging the bank’s innovation ecosystem, which includes acceleration and incubation hubs for the retail bank and global markets, supporting new startups and acting as an equity investor.

It is already producing new commercial offerings such as Pack Solaire in France, which is a one-stop shop that will help corporate clients install solar panels and which has been extended to Africa via Senegal and Morocco, in addition to opportunities to become a direct investor.

Direct investments include AfriGreen, which finances solar power plants on and off grid and a shareholding in EIT InnoEnergy, a sustainable energy innovation engine with 200 startups in its portfolio.

These more entrepreneurial elements complement the bank’s position in the renewable energy sector as a major project financier in deals such as the Gulf of Suez which is Africa’s largest wind farm and positioning across other value chains including hydrogen, decarbonisation, energy efficiency and battery storage.

Initiatives around biodiversity include tackling deforestation through ESG-labelled issuance such as a sustainability-linked loan for commodity trader Viterra and a sustainability bond for Region Ile-de-France to finance the restoration of ecosystems.

SG has also launched new biodiversity-linked financing products, including agroforestry structured notes and proprietary biodiversity screened equity indices which track the performance of companies based on their potential negative impact on biodiversity relative to peers.

It is also supporting the development of a circular economy through deals for maintenance, reuse and recycling that include an investment in Polestar, the only debt fund in Europe that is dedicated to the circular economy.

ESG boot camp

As the path to decarbonisation involves the whole bank, an internal transformation plan was required that involved a mass training programme, setting ESG objectives for more than 4,000 managers as well as incentives for new positive impact ESG financing and an audit of the bank’s progress to date.

SG deployed an ESG maturity grid that was designed in-house to drive transformation across all businesses and service units and give a global view of everything required to fully embed ESG.

“It was a good way for us to test where people are and then push them a bit more in their ambition. What we saw is that the business units on the wholesale side were already more advanced than the retail business units and they were all more advanced than the service units,” Py said.

Another programme called “ESG by Design” was also launched for operational issues such as integrating ESG risk factors into risk management, processes and IT developments, creating tools to monitor portfolio alignment and infrastructure for ESG reporting and strengthening disclosure.

Staff went through rigorous internal training programmes in all units of the bank in all learning formats from conferences to podcasts, e-learning and even animation.

“With the maturity grid and ESG by Design, and with the fact that we put incentives, objectives and training altogether, I think that this year was quite remarkable in terms of progress,” Py said.

As a responsible employer, SG is also walking the talk as it currently has 54% of women on its executive committee and a goal to have at least 35% of senior leadership roles held by women in 2026 and also allocated €100m to reduce the gender pay gap in the bank.

“We are very proud to have a majority of women in the executive committee and, importantly, we’ve got women heading the three big businesses of the bank – the investment bank, the French retail network and the international network and specialised financing,” Palmieri said.

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