French financiers resist call to dump all fossil fuels from portfolio

French finance-industry executives including Natixis SA Chief Executive Officer Francois Riahi pushed back against calls to stop financing all fossil fuels and ban them from investment portfolios.

Natural gas has a role to play in the switch to a low-carbon economy, and the discussion on making finance more green must move beyond simply restricting activities such as coal investment, according to Riahi and Matthias Seewald, chief investment officer at Allianz SE’s French unit.

“We are reaching the end of restriction lists as the main tool of greening finance,” Riahi said in a panel discussion at Climate Finance Day on Friday. “Gas has been a real debate. On fossil fuels, it will be part of the transition.”

France’s top banks have a “huge” carbon footprint, Oxfam France and the country’s branch of Friends of the Earth said Thursday, calling for rules to force banks in line with a global warming target of 1.5 degrees Celsius. The groups said that financing and investing by BNP Paribas SA, Credit Agricole SA, Societe Generale SA and Natixis parent BPCE resulted in CO2 emissions equivalent to 4.5 times those of France in 2018.

Climate Finance Day is organized by Finance for Tomorrow, a branch of Paris Europlace, which aims to promote the Paris market place, and is under the patronage of French President Emmanuel Macron.

Allianz has investments in natural-gas distribution networks that could be used to transport other sources of energy in the future, according to Seewald. Riahi said Natixis uses a green weighting system to grade loans based on their climate impact, and financing gas-fired energy in a country relying on coal on balance has a positive impact.

“The transition will have to take into account where you start from and that’s what we try to do in our green weighting factor,” Riahi said.

Clients Undecided

While exclusion lists are a powerful signal, there’s a lack of green projects on the client side, said Remy Rioux, CEO of development bank Agence Francaise de Developpement. “What we all need is clients asking us for financing for renewable projects, rather than fossil fuel projects.”

So-called carbon pricing -- attaching a monetary value to a company’s emissions -- will be an important policy going forward, some of the executives said. Lawmakers need to send the market a financial signal by implementing such systems, said Karien van Gennip, CEO of ING Group NV’s French business.

Riahi said a price on carbon would make the energy transition easier and quicker “because it’s easier to align everyone based on financial indications than on assessment of climate impact.”

“Of course finance and business need to commit, but governments need to commit as well,” Amundi SA CEO Yves Perrier said. “On a European level, it’s clear that today we lack a common energy policy -- it’s not the world of finance that can define it. The question of a carbon tax has to be tackled, it’s an important signal.”

© 2019 Bloomberg L.P.

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