How do we make “green finance” one of the keys to the Group’s growth?
“Making a success of the energy transition is a key challenge. It means investing substantially in low-carbon energy and adapting business models. Finance can – and must – contribute to this transition. The Crédit Agricole group is fully committed to this approach.”
Yves Perrier, Deputy CEO of Crédit Agricole S.A. and CEO of Amundi, with responsibility for overseeing the Societal Project for Crédit Agricole S.A.
Fully engaged in addressing the climate emergency, in June 2019 Crédit Agricole adopted a climate strategy aimed at making green finance a growth driver for the Group, in keeping with the Paris Accord. This strategy is based on the International Energy Agency’s sustainable development scenario, which sets out a global energy mix compatible with the Paris Accord trajectory out to 2050 (well below +2°C). To fulfil this complex ambition, the Group has set out the critical success factors for this strategy.
The first is a commitment to transparency, supported at the highest levels of governance. Overseen by a governance structure underpinned by scientific expertise and operational evaluation, implementation of the climate strategy will be verified and certified by PwC, an independent third-party organisation. Furthermore, the Group has committed to include a chapter on climate issues in Crédit Agricole S.A.’s statement of non-financial performance.
The second critical success factor lies in the Group’s ability to assess its corporate customers’ alignment with a sub-2° C scenario and reallocate its own portfolios in keeping with that scenario by stepping up its energy transition and cutting its financing for fossil fuels. The Group has already decided to completely pull out of financing thermal coal by 2030 in Europe and OECD countries and by 2040 worldwide.
The climate strategy is monitored at the very top of the Group. All entities are affected and will be taking action accordingly. Three dedicated committees have been put in place.
The Societal Project Committee will set out the proposed strategic direction in this area, based around the two fundamental pillars of inclusive finance and green finance. The committee consists of six CEOs from Crédit Agricole S.A. group and six Regional Bank executives (Chairs and CEOs).
The Scientific Committee will undertake work related to the climate strategy and put forward proposals. It will support the Group through the various phases of implementation and translate the Paris Accord into operational terms. The Scientific Committee, which consists of academic partners and recognised experts from the marketplace, will work with identified in-house experts from various Group entities. Organisations represented on the committee will include, for example, ADEME (the French environment and energy management agency), the National Museum of Natural History and Ecole Polytechnique.
The Monitoring Committee will constitute a forum for dialogue between Crédit Agricole S.A. group business unit leaders to facilitate implementation of the climate strategy and the adoption of a coherent Group position aligned with the Group’s commitments. This dedicated governance structure will continuously work to reconcile regional economic development with the climate trajectory.
Incorporating the energy transition into customer relationships
To encourage them to commit to the energy transition, large corporate customers will initially be assigned a Group transition score to rate their progress in the energy transition and check that it is in line with benchmarks laid down by the Group in its actions to finance the energy transition.
The transition score will be both a tool for measuring businesses’ maturity in the face of the challenges posed by climate change and atool for dialogue to help identify risks and opportunities to corporate customers’ performance from aligning with a +2°C trajectory. When a business’s transition score and trajectory are both positive, this will strengthen the business relationship. Businesses whose score deteriorates will be placed on a watchlist. If there is no transition trajectory at all, the relationship may be suspended. This transition score, which will gradually be rolled out to all sectors in 2020, will support the Group’s ambitions out to 2022 in terms of both risk management and revenue growth.
Gradual “greening” of the Group’s balance sheet, asset management and investment policy
The aim is to increasingly finance projects that support the energy transition. With this in mind, sector-specific policies will be reviewed in light of the climate strategy, ESG criteria will be applied to financing and investment, and the “green” offering will be expanded (green bonds, green funds, etc.).
Examples already underway include the following:
- Amundi has set itself a target of incorporating ESG (environmental, social and governance) criteria into all the funds it manages by the end of 2021. As regards its product range, Amundi has launched a green bond fund in partnership with the European Investment Bank to speed up energy transition projects in Europe. In addition to Amundi, this Group project involves CACEIS, Predica and CACIB, while ten or so Regional Banks have already signed up.
- Meanwhile, Crédit Agricole CIB recently issued a transition bond underwritten by the AXA group. This new sustainable financing tool is designed to help industrial sectors with high greenhouse gas emissions negotiate the environmental transition. The bank also recently launched a “green service contracting” offering enabling its customers to fund investments linked to energy-efficiency projects on the basis of the savings made.
Read the feature on the Group’s climate strategy in support of a FAIR TRANSITION by clicking here