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To reduce coal exposure, BNP Paribas cuts ties with Polish electricity producers

BNP Paribas SA will no longer finance electricity producers in Poland because of their dependence on the coal industry, Laurence Pessez, the bank's head of corporate social responsibility, said May 23.

The French bank had placed the producers under surveillance in 2017 in the hope that the country would start investing in more renewable forms of energy, but two years later there is no evidence to suggest the companies BNP Paribas finances have changed their strategy, she told the bank's shareholder meeting in Paris.

It had thus decided to no longer finance those businesses, she said.

"It is a brave decision that wasn't easy to make given that we have a large presence in Poland," Pessez said. BNP Paribas has 3.5 million clients in Poland and recently expanded its presence in the country after buying some of Raiffeisen Bank International AG's Polish operations.

She said the bank was obliged to see through existing contracts, but that the amount of its loans to the sector would decline "significantly" between 2019 and 2023. By 2028, the bank will have no exposure to Polish electricity companies, she said. According to the European Association for Coal and Lignite, Poland generates about half of its electricity production from coal-fired power plants.

The largest Polish power companies include PGE, ENEA SA, Energa SA and TAURON Polska Energia SA.

The financial sector is coming under increasing pressure from environmental groups and investors to exit fossil fuels at a faster rate and to end the underwriting of the coal, oil and gas sectors.

Like many banks, BNP Paribas is looking at different ways of reducing climate change risk to its lending portfolio. It started restricting investments in coal in 2011 and in 2015 committed to end the direct financing of coal projects.

In 2017, it said it would no longer do business with firms whose primary activity involves oil and gas from shale and/or oil from tar sands.

Coal now represents less than 20% of BNP Paribas' financing of electricity production, lower than the 38% financed by banks globally, Pessez said. By 2040, BNP Paribas will no longer have any exposure to electricity producers who use coal-fired plants.

The bank was working with energy companies such as RWE AG, which operates Germany's largest coal fleet, to exit fossil fuels, and it will stop financing companies that do not adhere to BNP Paribas' climate strategy, she said.

A member of BNP Paribas' executive board is currently in talks with a RWE executive about reducing the company's carbon footprint, Pessez said.

RWE has been singled out for its planned expansion of a controversial lignite mine near the city of Cologne. A court ruled in October that RWE could not raze several hundred acres of the Hambach Forest to expand the plant until 2020 pending an environmental review.