BNP Paribas on formal notice to stop supporting the development of fossil fuel projects

On 26 October 2022, NGOs Oxfam France, Friends of the Earth France and Notre Affaire à Tous formally put the BNP Paribas group (the French parent company and its subsidiaries) on notice to stop supporting the development of fossil fuels and abide by its legal obligations under the French duty of vigilance act (Law No. 2017-399 of 27 March 2017) within three months, under the threat of legal action. These NGOs contend that BNP Paribas would be a “major contributor to the risks associated with global warming”, by supporting major oil and gas companies, through both its financing (i.e., granting loans and issuing stocks and bonds to these companies) and investment (i.e. holding stocks and bonds in these companies) activities.

In January 2020, legal proceedings were brought against TotalEnergies on the basis of the same French duty of vigilance act by five French NGOs (Notre Affaire à Tous, Sherpa, Zéa, Eco Maires, France Nature Environnement) and more than a dozen French local authorities. The claimants argued that the vigilance plans successively published by TotalEnergies in 2018 and 2019 did not comply with the requirements set out by the 2017 French act. As reported in our previous blog post, the cities of Paris and New York, as well as NGO Amnesty International, recently announced that they joined the initial claimants.

Last year, in the so-called “case of the century” (L’Affaire du siècle), two of these NGOs (Oxfam France and Notre Affaire à Tous) obtained – under different legal grounds – a judgment from the Paris Administrative Court holding the French state responsible for failing to take sufficient action to fight climate change (read our blog post here). After states and oil and gas groups, financial institutions are now also under direct threats of climate litigation.

Legal basis for the NGOs’ claims

The letter of formal notice (mise en demeure), addressed to the bank’s CEO, is based on the new Article L. 225-102-4 of the French Commercial Code, introduced in 2017 by the French duty of vigilance act.

This provision requires companies to establish, effectively implement and publish a vigilance plan which “shall include the reasonable vigilance measures to allow for risk identification and for the prevention of severe violations of human rights and fundamental freedoms, serious bodily injury or environmental damage or health risks resulting directly or indirectly from the operations of the company and of the companies it controls (...) as well as from the operations of the subcontractors or suppliers with whom it maintains an established commercial relationship, when such operations derive from this relationship”.

Such plan must also include: “1° A mapping that identifies, analyses and ranks risks; 2° Procedures for regular assessment of the situation of subsidiaries, subcontractors or suppliers with whom there is an established commercial relationship, in the light of the risk mapping; 3° Appropriate actions to mitigate risks or prevent serious violations; 4° A mechanism for alerting and collecting reports on the existence or occurrence of risks, established in consultation with the representative trade unions in the said company; 5° A system for monitoring the measures implemented and evaluating their effectiveness”. 

The NGOs also refer to soft law instruments, namely OECD guides on “Due Diligence for Responsible Corporate Lending and Securities Underwriting” for BNP Paribas’ funding activities and on "Responsible business conduct for institutional investors" for its investment activities. They consider that the bank’s exercise of its duty of vigilance must involve the identification of climate risks induced by its activities, and the effective implementation of related vigilance measures, including the definition and implementation of a decarbonisation pathway for all its funding and investment activities.

The NGOs’ contentions as regards the bank’s current vigilance plan

The NGOs claim that BNP Paribas would breach its duty of vigilance by failing to provide a robust plan to identify, mitigate and prevent environmental and human rights risks arising from its activities. In particular, the NGOs contend that:

1.  The bank’s risk mapping would be incomplete, vague and deficient, as it would fail to identify (i) the climate and environmental risks associated with its fossil fuel activities, both for projects in which the bank is directly involved and for companies the bank is supporting through fundings and investments and (ii) the same risks associated with the new projects and expansion plans of its client companies.  
2. The bank’s procedures for regular assessment of the value chain (subsidiaries, subcontractors, suppliers and business relationships) in view of the risk mapping would be weak and there would be no procedures for assessing the actual climate impact of the activities the bank finances or invests in across the value chain.
3. Actions to mitigate risks or prevent serious harm would not be reasonable nor appropriate, given the urgency and importance of global warming, as well as the alleged scale of the bank’s contribution in the same. NGOs accuse BNP Paribas interalia to refuse excluding from its activities new oil and gas projects and companies planning to develop such projects.
4. There would be no system, in the bank’s vigilance plan, for monitoring the measures implemented and evaluating their effectiveness.

The NGOs’ request for BNP Paribas to step out of the oil and gas industry

In view of these alleged shortcomings, the NGOs gave BNP Paribas formal notice to adopt “reasonable and appropriate vigilance measures”, integrated into a new vigilance plan and effectively implemented within three months of receipt of the abovementioned letter.

According to the NGOs, this new vigilance plan should adequately incorporate the five measures laid down in Article L. 225-102-4 to the French Commercial Code by including:

1. A regularly updated mapping, which presents, analyses and priorities the risks of serious harm resulting from BNP Paribas’ activities in the fossil fuel industry.
2. A concrete quantification of the impact of the BNP Paribas’ activities on the risks identified, analysed and prioritised, including the exhaustive greenhouse gas (“GHG”) emissions of the bank and the companies it supports.
3. Appropriate measures to prevent serious damage and mitigate risks, in line with the Paris Agreement’s objective of limiting global warming to 1.5°C. For the NGOs, this would mean at least:
   1. the immediate halt to all financial support (through fundings and investments) for companies developing new fossil fuel projects;
   2. the adoption of an exit plan from the oil and gas sector, in line with scientific requirements for a reduction in fossil fuel production by 2030, with a view to a final exit by 2050;
   3. the implementation of measures to reduce BNP Paribas’ emissions of carbon dioxide (CO2) and methane (CH4) by at least 45 % in 2030 compared with 2010 levels, equivalent to an annual reduction of around 7 %; and
   4. the appropriate reduction of other GHG emissions.
4. A system allowing for periodic monitoring of the measures implemented under the bank’s vigilance plan and regular evaluation of their effectiveness.
5. The implementation of an appropriate alert and reporting mechanism.

Threat of legal action

In their formal notice letter, the NGOs threatened BNP Paribas to refer the matter to the Paris courts in case the bank would fail to adopt and implement the measures they consider appropriate within the three months.

As per the NGOs, this case would be “the first climate litigation in the world” involving a commercial bank (so far, mostly states and oil and gas companies have been subject to such claims) and requesting the same to stop supporting new oil and gas projects, which would be – according to NGOs – not compatible with the 1.5°C target set by the Paris Agreement.