BNP Paribas – Innovative collaborative financing for sustainability
Ana Ferreira (BioMarine Community Manager)
BNP Paribas has always been at the forefront of environmental discussions. With the growing need for clients to adopt sustainable practices to fight the Climate Crisis, biodiversity loss and inequalities, BNP is focused on providing proper guidance and support in this transition through innovative financing solutions. Pierre Rousseau, Senior Strategic Advisor for Sustainable Business for the Corporate and Institutional Bank, is currently supporting BNP Paribas clients developing new operating and investment models that rely on environmental and social parameters through innovative financing solutions. BNP Paribas will be one of the main Partners of the BioMarine Convention and Pierre Rousseau and his team will be representing the Company.
You can’t miss the opportunity to know all about them and what they’re doing.
The role of the banking industry in the sustainability transition
The Banking Industry, and more extensively the financial sector, has a critical role to play in the fight against climate crisis, biodiversity loss and inequalities as Pierre explained – “We are not developing sustainable finance, we are developing solutions to finance the sustainability that our corporate clients are developing and our investor clients are looking to invest in by integrating the UN’s Sustainable Development Goals”. But how are they doing this and what are the main goals? Pierre clearly explained – “The main objectives are to scale new greenfield solutions in energy, mobility, agribusiness or buildings and infrastructure, to de-risk them and to optimize them while integrating environmental, social and well-governed processes”.
ClimateSeed – catalysing financial solutions for carbon sequestration
Most of the BNP Paribas’s delegation at the BioMarine Convention will be composed by ClimateSeed, a 100% BNP Paribas subsidiary. Pierre told us all about this initiative – “The world has developed its economy during the past 250 years by extracting carbon from the earth. It is obvious that the world will spend the next 100 years transferring this carbon back from the atmosphere into the earth. Consequently, in the 1,5-degree target, we do need to develop financial solutions to accelerate initiatives that promote carbon sequestration. This was the main reason to create ClimateSeed in order to value the Credit Carbon as a financial asset class”.
And how does this platform work? Pierre explained us that – “This platform allows projects generating credit carbons to sell them to activities that need credit carbon to be carbon neutral. This subsidiary – fully created and owned by BNP Paribas is a social business and a non-profit organization. In addition, at BNP Paribas, we also have carbon credit activities though our Global Markets business”.
Integrating this new approach in the industry
This new credit score and rating mechanisms will allow for better environmental and social conditions, but it is crucial that the industry adopts these new trends. Hence, Pierre explained some of the challenges of implementing this strategy and how to address them – “By integrating environmental, social and proper governance conditions into the financing products and solutions, it doesn’t drive systematically to a better counterparty risk, at least in the short term. We also need to be cautious by applying «Green» and «Brown» to financial assets, by assessing properly consequences and impact, it is clear that the trends for the finance industry will be to provide better margins to clients who are applying strong environmental, social and governance practices and less attractive margins for the ones who are not respecting any. It will be the case for supply chain financing and project financing”.
Some of the on-going projects and main out-puts
Recently, in Indonesia, BNP Paribas contributed to provide an innovative financing solution to allow the development of a completely sustainable rubber plantation, and Pierre told us all about it – “This transaction is called the TLLF, the Tropical Landscape Lending Facility, a blended finance facility collectively structured by BNP Paribas, ICRAF, UNEP and ADM Capital Foundation. It allows an off-taker – Michelin - to buy sustainable rubber from its provider, RLU, a joint-venture with a local company. It is innovative as it develops collaborative financing schemes to leverage private finance for public good by mobilising capital markets which will finance projects with deep environmental and social impacts to scale them, to de-risk them and to optimize their funding. It will mix private, public and philanthropic funds to maximise environmental and social impact which in turn enables to clearly measure them without jeopardizing the adjusted risk-return profitability”. Besides this, the team is already working in other projects, as Pierre shared – “We are now working on 8 additional transactions which will include an additional feature to also finance smallholders. This Blended Finance model will be easily applicable to the sea and marine activities like it is for the land use for the agroforestry and the regenerating farming”. This represents a unique opportunity for the BioMarine Community to leverage their businesses with marine resources.
Financial tools for marine-based projects
Very often, it is difficult for local seagricultors to have access to funding opportunities. However, the financial tools that can be used to foster this bottom up approach are growing and becoming available. Pierre shared his vision for some near future opportunities - “In an economic world which is changing faster every day, the financial ecosystem sometimes isn’t able to adapt itself as quickly. Consequently, financing solutions for greenfield entrepreneurs will continue to be developed out of the traditional banking environment: blended finance, financing of the supply chain with traceability tools, financing public guaranteed, and dedicated funds specialized in investing in circular economy or nature-based solutions. In addition, we can work out finance solutions for the marine players as we did for agroforestry and regenerating farming actors. Furthermore, the credit carbon as an asset class will bring new financing opportunities”.
BNP is looking into the blue economy for new opportunities
For this year’s BioMarine Convention in November, BNP Paribas will come with an international and internal task force to understand better the BioMarine Ecosystem, and Pierre shared their main expectations – “During the Climate Week in New York, on 10 September, BNP Paribas formalised its commitment to SDG 14 “Life below water” and disclosed its actions in favour of ocean protection. One of the key points of this commitment is the ecosystem of the start-up and SME developing new activities around the biomarine and the sea coastal economies. The Blue Economy is a fast-growing sector which could bring solutions to the scarcity of land resources. It will interest large corporates, and long-term investors with nature-based solutions on land use, but also marine-use”.
For more info about BNP Paribas, check out their website HERE or connect with the Team through the BioMarine Community!