Yann Louvel, on Feb 5, 2013. Climate and Energy Campaign Coordinator for the BankTrack network.
Five years after mentioning the idea for the first time, the ‘big bang’ happened on the eve of the Christmas holidays: Crédit Agricole finally published its first six energy sector policies, covering coal power plants, oil and gas, shale gas, hydropower and nuclear power. While these bring some interesting developments – such as the exclusion of some finance for artic drilling and tar sands – they are plagued by multiple loopholes, and fall very short of the mark relative to BankTrack’s demands and what is needed for a true energy transition.
Before analysing the content of those policies, it is important to stress that the first major problem lies in their scope, for two principal reasons. The first is that these policies only apply to Crédit Agricole CIB, the corporate and investment banking branch of the Crédit Agricole Group. They most notably do not apply to Amundi, the bank’s asset management branch, which manages more than 700 billion euros. The second is that most of these policies only really apply to project-related finance, and not to all corporate loans, nor to the issuance or management of corporate shares and bonds. This is particularly problematic since BankTrack’s latest sector studies on nuclear and coal clearly showed that these are the main sources of financing for companies in these sectors.
On the content of the policies themselves, a second major problem can be summed up in one word: “loopholes”. The policies are filled with a very specific style of vocabulary – we could call it “avoidance vocabulary” -which leaves a huge amount of room for interpretation. Words such as “essential“, “substantially“, “significant“, “main“, “extensive“, “sufficient“, and “acceptable” are all good examples, and are never defined. This trend is more obvious in other phrases such as “deemed inappropriate” or “in its opinion“. Worse, exclusion criteria often begin with “the Bank will not participate in financing projects if aware of the following characteristics” – so that even the bank’s ignorance might be used as a loophole.
There is even a special section titled “Exceptions”, which appears in all the policies, stating that “transactions that present uncertainty with respect to compliance shall be referred to the CERES committee for recommendation“, which can lead to “a final arbitration by the General management of Crédit Agricole CIB“. This alone provides plenty of room for interpretation, and potentially undermining, of each of these new policies.
Aside from these numerous loopholes, a number of other points need to be made on problems with specific policies:
1. The way each of the issues in each sector are presented is biased to reflect the view of the bank rather than any “objective” view. To take just one example, Crédit Agricole reference the International Energy Agency’s “World Energy Outlook 2010” in their coal power policy (which, incidentally, they incorrectly refer to as the “World Economic Outlook” ) to state that “the EIA estimates that coal will keep [its] first place in the world electric generation on horizon 2035“, rather than referencing the more recent World Energy Outlook 2012, in which the section on coal is entitled: “Will coal remain a fuel of choice?”.
2. The minimum technology required by the bank for the financing of new coal power plants is supercritical technology (> 38% plant efficiency), which merely follows existing trends rather than catalysing better standards, and is moreover totally insufficient to face the climate crisis envisioned. The bank has not even adopted stricter criteria for the financing of new coal power plants in high income countries, as HSBC, BNP Paribas or Société Générale have done.
3. One particularly interesting development is the exclusion of finance for tar sands projects and offshore oil projects in the Arctic. Given the policy’s enormous limitations of scope and its loopholes, it is difficult to say whether, for example, Shell would be excluded from any form of finance given its controversial activities in the Arctic. The policy is just blurry enough not to answer that question… and this will surely be a test case for the credibility of its implementation.
4. Crédit Agricole has become the first private bank to develop a sector policy on shale gas. While this is welcome, the policy unfortunately follows the same pattern as we have seen for nuclear power among other international banks: rather than excluding these controversial activities from the outset, the bank has tried to establish specific criteria, with the use of “reference countries” to supposedly set the standards for a sufficient regulatory framework. (This recalls the way BNP Paribas included Japan as a “reference country” in its nuclear power sector policy in February 2011, only to correct this a few months later after the Fukushima catastrophe.) Crédit Agricole has decided to choose the United States, of all countries, as the “reference country” for the shale gas sector, ignoring the many documented impacts of shale gas on the environment and local communities, as well some well-documented regulatory problems such as the exemption of hydraulic fracturing from the Safe Drinking Water Act (the so-called Halliburton Loophole).
5. On dams, the opening statement of the policy that “hydroelectricity is a renewable and low carbon source of energy” is somewhat contradicted by one of the exclusion criteria stated later: the exclusion of projects where there is ” evidence that GHG emissions from the reservoir exceed, on an annual average, those of a coal-fired power plant of the same capacity“.
6. Returning to the “reference country” issue, Crédit Agricole’s whole approach to the nuclear sector is jeopardised by the Fukushima catastrophe. The only way to exclude Japan from its list of “reference countries” was to do as BNP Paribas have done and to add the criteria that there must have been “no accident rated 4 or above on the INES scale within the past 5 years“. This mockery is an implicit recognition that a nuclear accident can happen anywhere in the world, despite all the “analysis criteria” considered – and this is one of the main reasons nuclear power should not be funded at all.
To sum up, Crédit Agricole’s energy sector policies fail to live up to expectations. While they may (hopefully) stop the bank from financing some of the very worst projects , they remain very far from BankTrack’s demands, namely that banks should completely disengage from financing many of these controversial activities, including all new coal-fired power plants and new coal, oil and gas extraction. The energy transition we need will simply not happen if banks continue to fund new coal fired power plants, unconventional fossil fuels, big dams and nuclear power – Crédit Agricole’s new sector polices will not stop this.