Banking Across the Spectrum
Banks occupy a unique position in the spectrum of capital. Our members at BNP Paribas Wealth Management know this, and are leading several initiatives to deploy vital funds where they are needed the most, effectively making more capital impact capital. In the spirit of inspiration, we invited them to share these with stakeholders in our market building projects.
Positive examples matter.
In a previous installment, we’ve given the word to Peter Surek of ERSTE Social Finance, one of our most prolific members in Central and Eastern Europe. For this edition, we gave the digital floor to Maha Keramane. She’s Head of the Positive Impact Business Accelerator for the BNP Paribas Group, that has been a member of Impact Europe for a long time
A culture of impact
Sustainability has been a key part of the banking group’s strategy for many years. Their long-standing commitment dates to 2010, when BNPP started restricting their financing and investments in coal related companies. It was the first step in a long process of shifting investments away from fossil fuels and towards more sustainable energy companies. In January of 2023, the banking group committed to investing 40 billion euros in the production of low-carbon energies by the year 2030, amounting to 80% of their total energy financing budget. Since then, this time target has been moved forward to 2028, with an even sharper ambition towards the year 2030. It is but one example of how the banking group addresses their own corporate social responsibility, with special attention to the ESG framework.
Maha explains that BNPP tracks progress towards these metrics in a CSR dashboard, that features 10 indicators dedicated to the banking group’s economic, social, civic, and environmental responsibilities. Some examples include targets for sustainable loans and bonds in their portfolio, share of women in senior management position and targets for the support to companies that contribute to biodiversity. There is added incentive in realizing the objectives put forward by ways of a deferred variable compensation. About 20% of the remuneration of over 8.000 key employees, as well as CEO’s and COO’s, is immediately linked to the group’s CSR performance
Double materiality
One key element in realising the goals put forward by the banking group, is to be both ambitious and realistic in their approach. In deploying their actual strategy, BNP Paribas aims to address ESG from different perspectives. There is a sort of double materiality at play here, Maha explains, in a sense that companies can have a positive or negative impact on society, but at the same time, companies can be impacted in the same ways by society, too. In other words, the banking group tries to incentivise companies to:
Do no harm, meaning they manage their negative impact in terms of human rights, environmental impact and business ethics
Do good, meaning they actively contribute to solving social problems and to sustainable development
Be resilient, meaning they have the means to transition towards more ESG-compliant and CSR-aligned business practices
It’s worth sticking with this last part, for a second, before detailing some of the ways BNP Paribas pursues the first two points. Maha illustrates some of the risks that companies face because of increasing regulations (such as The Corporate Sustainability Reporting Directive (CSRD) for example), legal implications and pressure from the capital markets. . BNP Paribas assists companies that are looking to make this transition in earnest, helping them mitigate the risks and possibly even turning them into benefits in the mid-longterm.
A large part of this goal is realized by extending sustainable loans and bonds to their clients. At the end of 2023, the banking group had extended a cumulative amount of 117 billion euros in sustainable loans and 67 billion in sustainable bonds.
To give some examples: BNP Paribas coordinated a 3 billion euro sustainability-linked bond to French cosmetics company L’Oreal, incentivizing them to transition into recycled plastics for their packaging and to reduce their greenhouse gas emissions drastically by 2025. Shinhan Bank in South Korea received pioneering social bonds for an amount of 500 million dollars, to be used exclusively for financing social projects from female borrowers. Another noteworthy project of the banking group was a bond of 1.25 billion euros for Slovenia, accelerating the country’s transition to a low-carbon economy and helping realize social goals ranging from housing to education and healthcare.
Beyond sustainability, the idea of transition, and even more crucially, a just transition, is becoming central to the strategy of the banking group. Part of that means aligning BNP Paribas’ own portfolio with their carbon neutral commitments (see their Climate Report, the first of which was released in May 2022), while pursuing social inclusion goals and taking into account the social impacts of ecological transition to correct them. At the same time, it means engaging with clients who wish to make the very same transition towards more sustainable business practices both environmentally and socially.
Do more good
Historically, for near 35 years, BNP Paribas has long been active in microfinancing to promote its actions on social impact, having distributed a cumulative sum of around 1.2 billion euros over 84 institutions in 33 countries, ultimately helping more than 2 million beneficiaries worldwide. With the emergence of those companies that already have positive impact at the core of their being – impact businesses, social entrepreneurs, and other social economy actors, BNP Paribas chose to address their needs. To maximize their potential impact (e.g. to do good more effectively), BNP Paribas launched the Act For Impact programme in 2014 to support the scale of impact enterprises through integrated banking solutions, a network of dedicated experts, pro-bono services, innovative financial instruments and specific banking products.
The Positive Impact Business Accelerator (PIBA) was launched in 2021 to reinforce and scale this programme. It’s an internal taskforce that is dedicated to designing and accommodating products and services that provide a boost to the impact economy specifically. They aim to add value in the different scales of the spectrum, enabling access to finance for vulnerable communities, accelerating the growth of impact entrepreneurs through impact investing, contributing to the social economy ecosystem at large, too, and giving access to the MESIS framework for impact measurement. This MESIS framework provides over 400 key indicators, allowing impact entrepreneurs to consolidate their additionality and to attract new investors.
Impact entrepreneurs can also access impact bonds, which are financed by private investors with the goal of generating a certain impact. Entrepreneurs can use the initial capital from the bond to realize this goal, while investors receive repayment from public authorities once the project has been successfully concluded. It’s an elegant way or marrying result with practical convenience. There are plenty of examples within BNP Paribas Group. A impact bond to Oranjehuis in Belgium helped prevent 133 young people from becoming homeless, while different impact bonds helped veterans in the United States deal with trauma and assisted parents in overcoming substance abuse issues. More recent bonds aimed to set up a fund with Banque des Territoires and the European Investment Fund (EIF) to support more impact bonds, amongst which a first bond in the Netherlands to help prevent falls by the elderly.
Social impact bonds make a difference for vulnerable groups, like U.S. military veterans.
BNP Paribas Group is also an impact investor of its own, using their own funds to invest in companies they deem to bring scalable positive social and environmental impact alongside a sustainable business model to the table. About 200 million euros are dedicated to invest in social impact, climate change & local development and natural capital investments – the three subthemes identified by the banking group.
This brings us back full circle to our opening statement: positive examples matter. Banks and banking groups are uniquely positioned to leverage their funds to do no harm, and what's more, to do good and help create a field of resilient and impactful client companies. As a market building partner, we hope that sharing this example with stakeholders and partners in our current market building country portfolio can help inspire similar avenues towards impact, and we will continue supporting efforts in this direction.