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US-led political backlash has driven banks' ESG retreat

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BNP to focus on four themes in sustainable finance

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Bank survey found people want to invest thematically

By Virginia Furness

LONDON, Jan 24 (Reuters) - BNP Paribas is

rethinking sustainable finance to focus on profitable deals and

on redefining what it considers sustainable, a senior executive

said, as it became the latest bank to distance itself from the

ESG label.

The shift in the French bank's corporate and institutional

banking (CIB) division is to ensure sustainable finance does not

come at the expense of profitability, Constance Chalchat, the

division's chief sustainability officer, said.

After initial enthusiasm for Environmental, Social and

Governance (ESG) investment, subpar returns have prompted a

widespread rethink.

Campaigners against ESG have drawn impetus from U.S.

President Donald Trump's return to the White House.

In his first few days in office, Trump has pushed back

against ESG areas such as diversity. On Thursday, he accused

Bank of America and JPMorgan Chase of not doing business with

conservatives.

Chalchat said the bank wanted to stick with investment it

linked to a sustainable future and helping companies and

societies adapt to climate change, but needed to ensure investor

returns.

"We want to remain relevant for the long run, even for U.S.

investors, and to realign profitability and sustainability,"

Chalchat said.

PRESSURE AND RESOLVE

Many big banks have reassessed their approach to climate

finance in the face of political pressure, especially from

conservative groups in the United States, and the need for

energy security following Russia's invasion of Ukraine.

In recent weeks, global banks have quit one of the

industry's main climate coalitions, drawing criticism from

campaigners worried the sector has lost its resolve to take

action on fossil fuels. BNP remains a member of the coalition.

The prevailing mood contrasts the excitement about ESG in

the immediate aftermath of the COVID-19 pandemic when oil prices

were rocked by a plunge in demand and energy majors turned

towards renewable investment.

BNP has sought to be a leader in aligning its business with

the goals of the Paris Agreement and last year said it would

stop stop arranging bond deals in the oil and gas sector.

Going forward, Chalchat said, BNP's corporate and

institutional bank will focus on four themes - adaptation,

transition, conservation and societal resilience.

It will support companies and promote investment

opportunities where it sees both future financial growth and

positive contributions to the planet and society, she said.

It would also broaden the definition of sustainability to

encompass efforts to decarbonise heavily emitting sectors such

as cement and steel.

That means elevating investment in areas such as water,

agri-business and adaptation finance, while abandoning generic

exclusion frameworks that exclude entire industries and risk

underperformance, she said.

"We believe these things can really deliver financial

performance on top of actions that are required for the planet

to be resilient," Chalchat said.

A survey of investors carried out by the bank last September

found over half of equity investors expected to increase their

focus on thematics, including on renewable energy, water, and

health and wellbeing, she said.