This week, “BNP Paribas SA, the European Union's biggest bank” stated that it “is no longer participating in conventional bond issuance for” “oil and gas producers.”  In essence, BNP Paribas has announced that it will cease financing the fossil fuel industry.  This development has been attributed to “stricter ESG regulations in Europe as well as a lawsuit brought by climate activists.”  Notably, even though BNP Paribas is withdrawing from the fossil fuel industry, it has become “the biggest underwriter of green bonds globally” and a major player in sustainable finance, indicating a shift in accordance with the energy transition from fossil fuels to sustainable energy. 

This action by BNP Paribas serves as an illustration of one of the greatest fears of the fossil fuel industry (and of the state governments supporting them)--that climate regulations could be designed and implemented in such a fashion so as to effectively starve the fossil fuel industry of access to capital, even when those enacting such regulations disclaim any such intent.  While BNP Paribas is hardly a major player in this sector, its decision here may amplify those fears and cause additional pushback from fossil fuel interests, and sympathetic governments.  

Still, it should also be noted that this development further demonstrates the ongoing divergence between the European Union and the United States with respect to climate regulation, as the EU has been imposing significantly more stringent requirements than the United States.  Indeed, as reported by Bloomberg, “US banks are actively stepping in to take over contracts abandoned by European banks.”  So the immediate impact of BNP Paribas' decision will likely be quite limited, as the fossil fuel industry currently has a plethora of other financing options.