Energy transition: A matter of time

Out of the 55 components critical to a clean energy transition, only two are fully on track with the International Energy Agency (IEA) ’s Net Zero Emissions by 2050 (NZE) Scenario. Yet the energy transition is a widely shared priority, with countless private and public actors deploying considerable efforts across industries and geographies. So, what gives?

• All experts agree: our heavy reliance on fossil fuels is responsible for the climate crisis. Yet pulling the plug on fossil fuel production from one day to the next would have devastating consequences on a social (oil, coal, and gas account for 18 million jobs worldwide) and economic level (fossil fuels make up 80% of the global energy supply). And it would leave most of the world’s population without replacement solutions for their mobility, heating, or industrial activities. Divesting from fossil fuels is and must therefore be a gradual process; conversely, electrification and clean electricity production require massive investment, new infrastructure, and thus… time.
• “Getting on track for the NZE Scenario will require a tripling in spending on clean energy and infrastructure to 2030”, writes the IEA, showing just why financial institutions are integral to the transition. Already the sector is rallying around initiatives such as the Taskforce on Nature-related Financial Disclosures (TNFD) , which aims to help private actors better integrate nature into their decisions, and which BNP Paribas is actively involved in. It is only through collective efforts in the same direction, including through wide partnerships and coalitions, that we can collectively progress towards our goal: a world that runs on low-carbon energy only. And the largest contribution banks can make to the transition is to finance major energy players on their path to low-carbon energy production.
• BNP Paribas has been doing exactly this for years – and it is working. In September 2022, our loans for low-carbon energy production (€28.2bn) far exceeded those for fossil fuel production (€23.7bn), and we secured a leading global position in green bond structuring and placement. Additionally, we stopped financing oil projects in 2016. Finally, we make sure our financing is used wisely, thanks to sector policies that define strict ESG criteria for our financing and investments.

• This year, we are entering a new phase in our support for the energy transition. Our goal, by 2030: to reach €40bn in outstanding financing for the production of low-carbon energies and to reduce outstanding financing for oil extraction and production to less than €1bn. On gas, we will focus on new-generation, low-emission thermal power plans and supply security. As recent events have shown, gas remains a necessary transition fuel in the gradual process we are all engaged in.
• The energy transition can appear frustratingly slow, but rethinking the foundations of our global economy across the board takes time – as does developing the technologies that will build a low-carbon world. One of these is carbon capture, which can be used to manufacture alternative fuels and will prove “key to achieve carbon neutrality”, writes Guillaume POUPY , ESG Group Expert – Climate, Low-Carbon Hydrogen at BNP Paribas. Another one is the decarbonization of steel production, to provide the low-carbon steel needed to build renewable energy infrastructure, such as wind power facilities, says Rodrigo Lencina , Senior Industry Consultant Steel and Metals Transformation at BNP Paribas.

New frontiers 

If we are to collectively reduce our CO2 emissions and limit the effects of climate change, we must fund and conduct the energy transition all over the world – not just at home.

• Speaking at the BNP Paribas Sustainable Future Forum, Air Liquide , the global leader in industrial gases, highlighted Africa, India, and the Middle East’s high solar and wind potential, hinting at the region’s pivotal role in the development of renewable hydrogen. Vincent Prot , Managing Director, Head of Advisory Middle East & Africa at BNP Paribas, stressed Air Liquide’s track record as a “change-maker, providing sustainable and innovative solutions to meet the challenges of the energy transition”.

Explorers

European agriculture largely depends on imported fertilizers based on nitrogen, phosphorus, and potassium.

• French biotech TOOPI Organics proposes a creative, sustainable initiative: using human urine as a biofertilizer! BNP Paribas has signed an Impact Bond, and invested in it through the BNP Paribas European Social Impact Bonds Fund, alongside Caisse des Dépôts et Consignations , Hippolyte Capital and Avelana , to help Toopi create a circular economy ecosystem around urine, by collecting it from public places and turning it into fertilizer.

Milestones

In a sea of statements, goals, and initiatives, it can be hard to assess the quality of ESG commitments taken by private actors.

• That is where extra-financial ratings come in. Granted by independent agencies, these ratings act as indicators on topics as varied as sustainable investment, gender equality on boards of directors, or carbon productivity, that investors can rely on to make informed decisions.
• That is why it is significant for BNP Paribas to be ranked among the most sustainable businesses in the world by the Corporate Knights Global 100 ranking, moving up several spots from last year’s ranking, to the 1st place among French banks and 4th place among banks overall.

From the observation post 

"While everyone else is emitting CO2, we're sequestering CO2!" Check out Loopsider ’s video on Le Printemps des Terres , a mission-driven company dedicated to the green transition of French agriculture, and which BNP Paribas is proud to support.