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Podcast: European banks sharpen ESG focus as COVID-19 highlights risk

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Climate change remains in sharp focus for European banks amid the coronavirus crisis, sustainability leaders at some of Europe's largest lenders said in exclusive interviews for the latest episode of "ESG Insider," an S&P Global podcast about environmental, social and governance issues.

Listen to this episode of "ESG Insider" on SoundCloud, Spotify or Apple Podcasts.

Banks face tough challenges as they make the transition to a more carbon-neutral economy, potentially losing business in the process.

"It's obvious that we will have to exit the relationship with at least 30% to 50% of our current clients in the power generation business," said Laurence Pessez, head of corporate social responsibility at large French bank BNP Paribas SA.

The lender lost 60 clients after it announced it would stop financing shale and oil sands projects, which had an impact on revenues, but Pessez told ESG Insider that was a price BNP Paribas was willing to pay to deliver on its commitments.

To tackle climate risks in a widescale way, banks and regulators need to address the ESG data gap, which is "a critical issue for risk management," said Antoni Ballabriga, global head of responsible business at Banco Bilbao Vizcaya Argentaria SA. BBVA is one of Spain's largest banks and also owns Mexico's largest lender, Grupo Financiero BBVA Bancomer SA de CV.

"We need comparability, we need access to data from our clients, and we need some synchronicity and better coordination among different supervisors," Ballabriga says in the episode. "Because we cannot expect banks [to disclose] information about climate risk of their portfolios if our corporates, our clients, don't report."

But the transition to a greener, more resilient economy cannot only focus on the environment and decarbonization, said Elsa Palanza, global head of sustainability and citizenship at big U.K. bank Barclays PLC. "It also means accounting for people's livelihoods and their futures and better global health and better access to social services," she said.

"It is daunting the amount of work that we have to take on," Palanza said. "But fundamentally, notwithstanding the huge cost that we've paid and the sadness associated with this pandemic, it does open up an opportunity for us globally to be thinking about the idea of building the system back, but in a totally different way.”

This episode is the last in a series of podcasts exploring how banks in different parts of the world are adapting their environmental, social and governance strategies amid the coronavirus pandemic. In the last episode, we heard from Mikkel Larsen, chief sustainability officer at southeast Asia's largest lender DBS Group Holdings Ltd. who said pandemic had brought social issues to the forefront as companies grapple with the way they treat their employees, customers and those in their supply chains. In our first episode, we spoke to JPMorgan Chase & Co.'s Head of Sustainability Marisa Buchanan about how the largest U.S. bank is responding to systemic racism and re-upping its focus on climate change following pandemic disruptions.

READ MORE: Sign up for our weekly ESG newsletter here, read our latest coverage of environmental, social and governance issues here and listen to our ESG podcast on SoundCloud, Spotify and Apple Podcasts.