Bank for Sustainability: Credit Agricole CIB
Faith in science For creating a robust and transparent science-based net-zero decarbonisation strategy that is delivering strong results and shaping sustainable finance while overhauling the bank's governance to embed carbon-emission reduction in all credit considerations, Credit Agricole CIB is IFR’s Bank for Sustainability.
Credit Agricole CIB has one of the most comprehensive commitments to sustainability in the market. Its plan details its decarbonisation efforts to bring the Credit Agricole Group to net zero by 2050, rolling out financing and investment to promote the energy transition.
One of CACIB’s most significant achievements in 2024 was being one of the first banks in the market to exclude participation in unlabelled conventional bonds from the oil and gas sector, along with BNP Paribas.
The policy went into effect in early 2024 after one outstanding oil and gas bond was completed in January and both banks announced the policy in May. NGO Reclaim Finance described the decisions as a “major step forward in the fight against climate change”.
“We are a big DCM house – that is an important decision for a bank like us,” said Tanguy Claquin, head of sustainable banking. “The fact that we got out of the oil and gas bond sector has a direct impact on our league table ratings. We accept doing less to do better.”
Although decarbonisation efforts are focused on the investment bank, as it has the highest exposure to high-emitting sectors, Credit Agricole Group’s broader operations are also covered by its net-zero commitments and targets that aim to decrease its direct carbon footprint by 50% by 2030.
Credit Agricole subsidiary, asset manager Amundi has pledged to have 18% of assets under management in funds aligned with net-zero 2050 objectives by 2025 and Credit Agricole Assurances is cutting carbon emissions on its listed equities and corporate bond investment portfolios by 25% by 2025 compared to 2019.
“The core of the engine is what is being done at the investment bank, which is by far the most important for the group,” Claquin said.
He was appointed as global head of sustainability in December 2021 and the bank created a climate and sustainability strategy team in March 2022 to drive sustainability and climate strategy with top management.
The eight-strong CSS team set sector targets for oil and gas, power, commercial real estate, automotive, cement, aviation, shipping and steel, in line with the bank’s commitments under the UN-convened Net-Zero Banking Alliance and CACIB’s own labelled portfolios and targets.
These targets are closely linked with the bank’s sustainable finance objectives and CACIB sees ESG debt instruments as one of the building blocks that will help it reach its targets.
The sustainable investment banking team now has 36 people, in addition to the CSS team, in 11 countries who work with issuers and investors and more than 300 coordinators across the bank with ESG training to develop sustainable finance.
Behind the scenes
Another significant move for CACIB in 2024 came behind the scenes, as the bank fully embedded carbon-emissions reduction into its credit and governance processes to accelerate the transition of its portfolios.
“We have transformed the process of the bank and the way that it is organised. The commitments we are taking mean that for every transaction within those sectors, we now need to take a decision on the carbon side,” Claquin said. “That is a sea change in the way the bank is organised.”
This work has taken two years, and carbon is now used to screen companies before going to traditional credit committees. A "net-zero simulator" has been created to assess the impact of deals on CACIB’s net-zero sector trajectories.
A simulator for each sector has been given to the commercial sales force along with a liquidity discount that increases over time to incentivise green over non-green transactions that can be adjusted depending on the ambition of the structure.
Calculating carbon footprints and their impact on the bank’s trajectories requires complex analysis of data sets and a centralised ESG data hub.
A six-person analytics team ensures that ESG data is available to teams that also include compliance and reporting in line with the Sustainable Finance Disclosures Regulation and the EU Taxonomy and the risk and finance department for European Central Bank reporting.
New governance structures were also required to set annual targets and budgets for every sector. A sector head has been appointed for each trajectory to arbitrate locally or globally and make decisions with coverage and business lines and the risk department.
“This [is an] industrial approach ... in terms of data, governance, systems, centralisation and IT. I think we’re the most advanced,” Claquin said.
CACIB’s sector targets are now biting, and the bank-wide approach is quickly yielding results after being fully implemented in 2024.
In 2020, outstandings from low-carbon energies (€10.9bn) and fossil fuel extraction (€9.4bn) were nearly at par but moved quickly in 2023 with an 81% jump to €19.7bn in low-carbon energy and a 24% reduction in fossil fuel extraction to €7.5bn.
That means that for every euro disengaged from fossil fuel extraction, four euros have been allocated to renewable energy.
“We are retrieving capital from fossil fuel extraction,” Claquin said.
Publishing the results of CACIB’s achievements against its eight sector targets provides transparency to the market as well as insight into decarbonisation problems in sectors such as cement and real estate.
“We don't hide the fact that this transition to low-carbon economy is a challenge for us, and for some of the clients that we are banking,” Claquin said.
Standard setter
CACIB is also pushing to meet its sustainable finance commitments by continuing to drive innovation and expand market guidelines and standards to improve advice and help capital allocation.
In early July, the bank was the first to create a sustainability-linked loan financing bond framework and issued an SLLB as a private placement after working with the International Capital Market Association to publish guidelines in June.
The framework publicly shared CACIB’s evaluating and selection criteria for SLLs and was the first to include an “ESG Performance Index”, which lists all sectoral key performance indicators and related sustainability performance targets used by the eligible SLLs.
The bank was also the first to issue dedicated guidelines on SLLs for funds and worked with the Loan Market Association on the adoption of guidelines for fund finance.
Like its peers, CACIB was required to publish its green asset ratio – or the proportion of investments aligned to the EU Taxonomy – from January 1. The bank's green loan portfolio grew by 67% between the end of 2022 and reached €20.7bn by the end of September 2024.
Claquin said CACIB is on track to meet its net-zero commitments and deliver on its promises by the end of 2025. It will tackle market-wide challenges in 2025 as the concept of a net-zero bank continues to develop in a more challenging geopolitical environment.
“A net-zero bank will be a bank serving an economy that is net zero, so we are not independent of that. There are steps that we have to take in the coming years – we are working on biodiversity and adaptation," he said.
"There is still some wood to chop in this market."
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