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Speaker 1: Welcome to zero. I am Akshatrati the summer of heat.

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Speaker 1: That's what protesters outside City Group's headquarters are calling it.

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Speaker 1: But some activists prefer to work from the inside, especially

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Speaker 1: when it comes to changing the financial system. And what

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Speaker 1: does that look like. Today's guest has the answer. Lucy

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Speaker 1: Finson is the director of the Paris based climate nonprofit

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Speaker 1: Reclaim Finance. She doesn't march or picket corporate headquarters. Instead,

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Speaker 1: Reclaim Finance gets to know the power centers inside big finance,

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Speaker 1: from sustainability chiefs to investment officers. Lucy has been at

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Speaker 1: it for a decade now, pushing big back to move

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Speaker 1: away from financing fossil fuels, and her efforts have led

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Speaker 1: to some of France's largest banks and insurance companies, including AXA,

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Speaker 1: to stop funding co In May, thanks to pressure from

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Speaker 1: Reclaim Finance, B and P, Pariba announced that it would

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Speaker 1: no longer underwrite bonds for oil and gas producers. Now,

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Speaker 1: there is still a long way to go, but these

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Speaker 1: are not small wins. So I caught up with Lucy

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Speaker 1: when she visited London earlier this summer and we talked

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Speaker 1: about how to break through on climate with finance.

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Speaker 2: Wonks.

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Speaker 1: We know we need to transition the global economy, including

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Speaker 1: companies and financial institutions that back them, to clean energy. However,

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Speaker 1: in the capitalist economy, short term profits outweigh long term risks.

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Speaker 1: But now that many of these long term risks aren't

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Speaker 1: really long term, climate impacts are happening now, many companies

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Speaker 1: are having to pay huge sums out to deal with them.

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Speaker 1: Insurance companies are sometimes going bankrupt not having enough money

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Speaker 1: to pay for these damages. Do you think it's finally

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Speaker 1: forcing financial institutions to focus on climate risk rather than

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Speaker 1: just short term profits.

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Speaker 3: Not really, because I believe what you say is true,

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Speaker 3: but only to a specific extent. It's true that the

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Speaker 3: insurance companies especially are already filling the heat and are

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Speaker 3: paying a lot every year to pay for the damage

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Speaker 3: cause by climate change. However, to another extent, there's still

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Speaker 3: a lot of money to be made into fussy fuels

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Speaker 3: in the very short terms. Before the invasion of Ukraine,

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Speaker 3: a positive fuelds company had been underperforming the market for

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Speaker 3: many years, and there was relatively broad consensus that FOSSi

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Speaker 3: fuels company future lies into a rapid transition away from

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Speaker 3: fossil fuels. But there has been a spike in oil

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Speaker 3: gas prices after the invasion of Ukraine, and there is

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Speaker 3: a general perception that geopolitical risk which are increasing, will

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Speaker 3: maintain this price is high and has made a pump

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Speaker 3: it fast strategy look attractive again in the very short term.

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Speaker 3: And we can see it also is the profits made

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Speaker 3: by the Olias majors. There's still a lot of money

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Speaker 3: to be made by these companies and their shareholders into

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Speaker 3: FOSSi fuels. So I don't think the broad situation changed

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Speaker 3: to a big extent. I also think, like a lot

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Speaker 3: of investors and other financial institutions, they are aware that

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Speaker 3: they are using models that under sti made the damage

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Speaker 3: caused by climate change to the economy and undervalue the

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Speaker 3: financial impacts that it will have on their books, and

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Speaker 3: they're aware of it, but they are not adapting from

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Speaker 3: models to make up with the inconsistencies and limitation.

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Speaker 2: Yeah.

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Speaker 1: So it's been a little bit of a messy picture.

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Speaker 1: But one thing that perhaps has been going in one direction,

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Speaker 1: especially since signing the Paris Agreement, is that the measurement

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Speaker 1: of how financial institutions are responsible for funding activities that

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Speaker 1: increase emissions has been improving. So when we think of

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Speaker 1: companies that are responsible for emissions, you know, a fossil

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Speaker 1: fuel company producing oil, that oil is burned, emissions are produced.

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Speaker 1: But the banks that fund these fossil fuel companies are

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Speaker 1: also now starting to count those emissions in their books.

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Speaker 1: More recently, there have been a few bodies that have

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Speaker 1: come together and created a standard for how these emissions

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Speaker 1: that banks have through their financing is counted. So could

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Speaker 1: you just talk us through these terms that are being

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Speaker 1: created to count these emissions, so called financed emissions and

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Speaker 1: facilitated emissions. What do they measure and how has that

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Speaker 1: changed your work?

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Speaker 3: Yeah, it's true like more and more information is available

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Speaker 3: to track specifical financing. However, having this information does not

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Speaker 3: necessarily mean that there will be action on it. These

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Speaker 3: being said, a lot of banks after the launch of

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Speaker 3: the Glasgow Financial Alliance for net zero during the Cup

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Speaker 3: at Glasgow, they communicate to publish decabonization targets for specific sectors.

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Speaker 3: Many of them do publish targets for the awning gas industry,

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Speaker 3: which means that they published finance emissions, and some of

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Speaker 3: them have commedy to publish facilitated emissions. So let's have

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Speaker 3: a look at the two of that. Finance mission is

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Speaker 3: really the missions that are related to the loans that

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Speaker 3: a bank provides to the olingas industry. So if you

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Speaker 3: finance total energies or any or shale as a bank,

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Speaker 3: you will have to report a certain amount of the

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Speaker 3: missions attributed to this loan to an orang gas company.

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Speaker 3: Finance emissions are so about the exposure of a bank

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Speaker 3: to the olingas industry, meaning that the finance emissions will

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Speaker 3: also got down or disappear from the portfolio as soon

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Speaker 3: as the loan is being paid back. Facilitated missions is

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Speaker 3: about another very important type of financial services provided by

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Speaker 3: banks to the energy sector and to the oling gas industry,

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Speaker 3: which is the issuance the structurations of bonds. It's when

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Speaker 3: a company get access to capital not from a bank directly,

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Speaker 3: but from investors thanks to the intermediation of a bank.

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Speaker 3: That's why we call it if facilitated emissions. Here's a

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Speaker 3: lot of issues attributing these emissions. As for the finance emissions,

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Speaker 3: it's these emissions will disappear from the portfolio of a

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Speaker 3: bank as soon as the loan is being paid back.

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Speaker 3: For facilitated emissions, the bank needs to report on these

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Speaker 3: emissions the year it helps a company to issue this

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Speaker 3: specific bond. So there is an issue of responsibility here

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Speaker 3: because it means that the banks will report maybe four

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Speaker 3: years for a loan, maybe one year for a bond,

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Speaker 3: while actually the financing that has been raised by the

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Speaker 3: company thanks to the support of the bank, might actually

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Speaker 3: contribute to the development of a new fosssual project in

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Speaker 3: the real world that will emit greenhouse gas emissions for decades.

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Speaker 3: So there is a lock in effex supported by the

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Speaker 3: bank which is not fully taken into account by the

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Speaker 3: metrics Awaver these metrics remain important for banks to manage

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Speaker 3: climate related financial risk, it does not necessarily help them

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Speaker 3: stop contributing to climate change, especially in the short term

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Speaker 3: when we can see that facilitated emissions targets or finance

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Speaker 3: emission targets leave room for banks to provide new support

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Speaker 3: to companies despite the fact that these companies might be

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Speaker 3: at the forefront of the forcifual expansion, so in the

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Speaker 3: short term they are not effective enough to make sure

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Speaker 3: that a bank is not contributing to the warthening of

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Speaker 3: climate change a waver it's one way for banks to

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Speaker 3: manage climate related finance risk. The show that for banks

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Speaker 3: that really wants to play an active role fighting climate

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Speaker 3: change and managing the risk related to climate change, they

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Speaker 3: will have to adopt targets, but it won't be enough.

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Speaker 3: They will also need to adopt others as our measures.

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Speaker 1: And so let's come to your work with Reclaim Finance,

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Speaker 1: because your goal is to try and get banks to

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Speaker 1: stop financing fossil fuels. If just having new ways to

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Speaker 1: measure their financing or their facilitation of these emissions is

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Speaker 1: not enough, then are there other things that have come

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Speaker 1: to your toolbox that are helping you hold these banks

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Speaker 1: accountable for their emissions.

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Speaker 3: Sure, At Reclaim Finance, we love data. We focus more

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Speaker 3: on financial flows and less on the exposure of financial

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Speaker 3: institutions to fossil fuels because what they have in the

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Speaker 3: book is really the result of past financial services and

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Speaker 3: what is done is done. It cannot be changed. So

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Speaker 3: we are more interested in what we can do to

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Speaker 3: prevent banks from worsening the climate situation in the future.

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Speaker 3: And for that we have access to a lot of

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Speaker 3: financial data to track on a daily basis. What type

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Speaker 3: of financial services do the big banks provide to the

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Speaker 3: energy industry, and these provide, in our view, a very

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Speaker 3: fair image of the responsibility of banks in supporting climate change,

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Speaker 3: but also it allows us to identify new trend changes

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Speaker 3: in a way a bank is supportive of a specific sector.

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Speaker 3: For example, BNP Pariba publicly said that the bank abstained

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Speaker 3: from supporting conventional bonds in the lingas industry. We actually

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Speaker 3: identify this a year ago in their portfolio. It started

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Speaker 3: with a transaction for PP, a bond being issued by

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Speaker 3: BP in last twenty twenty three. BNP has been one

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Speaker 3: of the main banker of BP, so we were expecting the

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Speaker 3: bank to support this company. The banks didn't. Then there

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Speaker 3: was bond by or loan by ANY and banks didn't

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Speaker 3: support it neither. So we were wondering despite the five

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Speaker 3: being also one of the main bankers of ANY, so

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Speaker 3: we're wondering, that's interesting, something may be happening here, and

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Speaker 3: so we keep tracking the financial flows from BNP to

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Speaker 3: the awning as industry to figure out that really that

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Speaker 3: is something happening, and we add the conclusion recently with

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Speaker 3: the banks saying that it does abstain from this type

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Speaker 3: of transaction. So that's our way of working. We are

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Speaker 3: tracking on a daily basis what all financial transitions are doing.

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Speaker 3: And when we see such deals, it allows us to

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Speaker 3: go public about a specific bank having pledged to net zero,

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Speaker 3: having pledged to contribute to keep global warming at one

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Speaker 3: point five, yet keeping some financial services to direct for

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Speaker 3: the fuel projects or to companies that are still building

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Speaker 3: these projects, in contradiction with every IPCC report but also

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Speaker 3: with the projections of the International Energy Agency.

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Speaker 2: Right.

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Speaker 1: So the data is giving you a chance to be

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Speaker 1: able to hold these banks accountable and then sometimes you

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Speaker 1: do see banks change their behavior as a result. Can

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Speaker 1: you talk us through a few other success stories from

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Speaker 1: the work that you've done, where because of this push

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Speaker 1: to try and tell the world you know, here is

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Speaker 1: a promise that's made, but here's the reality, the bank

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Speaker 1: has then changed its behavior.

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Speaker 3: Yeah. I have a lot of examples. I started working

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Speaker 3: on banks ten years ago, so, and ten years ago

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Speaker 3: it was like really new as a topic. Like my

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Speaker 3: first campaign was against Society General, which was advising a

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Speaker 3: company for the development of a coal mine, a massive

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Speaker 3: coal wine in Australia, so Alpha Coal Projects, which was

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Speaker 3: not only a bad project for climate, but it was

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Speaker 3: also a bad project for biodiversity, considering the coal was

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Speaker 3: planned to be exported through the Great Berry Reef and

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Speaker 3: at that time climate was not on the agenda of

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Speaker 3: financial institutions. Coup twenty one had not happened yet, and

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Speaker 3: in France people didn't even know that coal was still

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Speaker 3: presented still a big share of the energy mix globally

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Speaker 3: because for French people, call was like the nineteenth century,

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Speaker 3: like Zola, So we had a lot of educations to

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Speaker 3: make and communication to make to teach people about the

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Speaker 3: reality that their money maybe was financing the development of

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Speaker 3: climate change, and it took us more than a year

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Speaker 3: to push Society General to withdrew from his mandate. Consequently,

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Speaker 3: the mind has never been developed, and we have a

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Speaker 3: couple of stories like that about how the public mobilization

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Speaker 3: had an impact and convinced some banks not to finance

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Speaker 3: specific projects because of their impact on climate.

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Speaker 1: After the break you see pushes beyond the limits of

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Speaker 1: corporate social responsibility. Like you, there are a number of

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Speaker 1: organizations around the world trying to do similar things. One

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Speaker 1: place where there has been perhaps the most success, is

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Speaker 1: to get these big financial institutions international ones to stop

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Speaker 1: financing coal. Now, the theory goes that As more and

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Speaker 1: more banks exit the financing of coal, the pool of

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Speaker 1: capital available for developing coal projects goes down, which means

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Speaker 1: the cost of capital, which is either interest rate or

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Speaker 1: some other form of payment that a company has to

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Speaker 1: make to build a coal project, goes up, and that

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Speaker 1: means it becomes less profitable versus already cheaper green technologies.

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Speaker 1: But if that's the case, and that is a success story,

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Speaker 1: then how come we hit a record level of coal

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Speaker 1: consumption in twenty twenty three and will likely hit another

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Speaker 1: record in twenty twenty four.

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Speaker 3: That's a very good question. It is true that the

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Speaker 3: adoption of coal policies or banks did have an impact.

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Speaker 3: It did have an impact on the companies that testified

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Speaker 3: that they have trouble accessing capital. And also there is

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Speaker 3: like a fantastic research by our Vard Business School which

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Speaker 3: demonstrated that companies that are exposed to banks exclusion policy

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Speaker 3: change of business faster than others, and that banks policy

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Speaker 3: can be associated with greenhouse gas emissions reductions because of

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Speaker 3: the closure of coal assets. So CaAl policies are effective,

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Speaker 3: but they need to be well made. And what we

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Speaker 3: know at Reclaim Finance and we are tracking hundreds of

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Speaker 3: policies adopted by financial institutions and fossil fuels. Is that

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Speaker 3: for coal we have hundreds and hundreds of policies, but

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Speaker 3: they are not all as good as the others. We

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Speaker 3: got a lot of policies that are really weak, that

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Speaker 3: are more like window dracing, and we got around less

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Speaker 3: than one hundred policies. It's more round fifty policy that

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Speaker 3: stop the expansion of new coal. So the policies are

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Speaker 3: not all good enough. They deal have an impact, but

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Speaker 3: they are not good enough. Secondly, and we will have

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Speaker 3: the same issue with the awning as industry in general,

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Speaker 3: that private financial institutions are not the only maker in

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Speaker 3: this story. We also need to think about public subsidies

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Speaker 3: and all the regulations that keep the fossil fuel industry afloat,

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Speaker 3: especially if you go to Indonesia, for example, where the

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Speaker 3: average year for a coal plant might be thirteen years.

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Speaker 3: So these coal plants on a macroeconomic stand they are

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Speaker 3: more expensive to operate than developing new renewable capacity. But

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Speaker 3: if you take only one of these plants, it's very

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Speaker 3: valuable for the company operating it that sign a purchase

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Speaker 3: power agreement with a power purchase agreement with the government.

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Speaker 3: So it's profitable for the OPEOO, it doesn't mean it

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Speaker 3: doesn't cost more for society. So if we really want

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Speaker 3: to transition out of fossil fuels we need to tackle

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Speaker 3: not only private financial institutions flows, we also need to

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Speaker 3: tackle public support. We need to stop to tackle the

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Speaker 3: world regulation. And this is why at Reclaim Finance we

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Speaker 3: pay particular attention to some regulation. For example, what's the

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Speaker 3: role of central banks. Central banks could help redirecting money

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Speaker 3: to the right place. For example, we believe that indiscriminately

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Speaker 3: raising interirace rates does harm investment into like capex and

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Speaker 3: low opex renewer and clean energies.

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Speaker 1: Right because the upfront cost of building a solar plant

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Speaker 1: and one farm is high at the start, but over

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Speaker 1: its lifetime of operations it's lower than for a fossil

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Speaker 1: fuel power plant exactly.

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Speaker 3: So it should be very important if central banks keep

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Speaker 3: increasing the interest rate that they differentiate between green investment

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Speaker 3: and pouring investment. They should keep them low for green

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Speaker 3: investment to incentive banks to drive more capital to this sector,

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Speaker 3: and on the other rays, they would need to make

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Speaker 3: them high to these incentive banks from supporting polling sectors,

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Speaker 3: including fossil fuels.

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Speaker 1: Yeah, so if I'm hearing you right, you're saying that

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Speaker 1: coal policies, they are varied and they can mean different things.

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Speaker 1: But if those policies hadn't existed, then the peak of

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Speaker 1: coal could have been even higher. So there has been

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Speaker 1: some reduction because of the work that you've done, but

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Speaker 1: obviously it's not enough. What I do find interesting, though,

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Speaker 1: is that there are many actors now trying to get

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Speaker 1: financial institutions to back off from financing. There are activists

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Speaker 1: who will go and glue themselves to banks. There are

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Speaker 1: people who will make a noise outside the bank, not

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Speaker 1: do any disruptive activity. Then there are people who will

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Speaker 1: go and talk to regulators about pressuring banks to do

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Speaker 1: the right thing. You are at Reclaim Finance sort of

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Speaker 1: inside the system. You are tracking them, but you're also

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Speaker 1: talking to the people inside the bank and explaining to

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Speaker 1: them why what you're doing matters and how it might

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Speaker 1: be something that they have to think about in the future.

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Speaker 1: You join shareholder conferences, you ask questions of banks when

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Speaker 1: they come up with a policy and it's not clear enough.

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Speaker 1: You're also getting to know the bank employees. And you

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Speaker 1: told me when we met last time in Paris, that

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Speaker 1: sometimes you find these bank employees aren't able to make

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Speaker 1: the change from the inside, so they come and join

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Speaker 1: Reclaim Finance or they go and join the regulator. You

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Speaker 1: talked me through some of these stories and how this

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Speaker 1: is over the past ten years of your work had

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Speaker 1: an impact.

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Speaker 3: So there's several things in your question. So we need

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Speaker 3: people who talk to us who understand the specificities of

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Speaker 3: who are the companies that needs to go, which are

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Speaker 3: the companies that can be supported in that transition, what

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Speaker 3: type of financial services needs to be adapted in this context,

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Speaker 3: and this change depending whether you are a bank on

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Speaker 3: intro and an investors. So our job as Reclaim Finances

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Speaker 3: to talk to these people to make sure that they

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Speaker 3: are fully equipped to adopt good policies. What we need

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Speaker 3: to understand is that the people we try to identify

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Speaker 3: with whom we can work with internality, they're not necessarily

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Speaker 3: convinced about the importance of fighting climate change.

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Speaker 1: We need to.

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Speaker 3: Understand that before the CSR department was really the last

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Speaker 3: office at the bottom of the corridor, with no importance

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Speaker 3: and no weight in a bank. Today's not the case,

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Speaker 3: and people are being hired to make change happen internally,

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Speaker 3: so they are in a complicated situation where they are

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Speaker 3: asked to make this change happen, and they are asked

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Speaker 3: also to manage reputational risk and protect the brand of

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Speaker 3: the banks the walkway, So they need to make sure

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Speaker 3: that people like me don't make too much damage publicly.

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Speaker 3: But at the same time they also have to listen

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Speaker 3: to me to also feed the discussion about sustainability inside

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Speaker 3: the financial institutions. It doesn't necessarily mean that people are

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Speaker 3: going to listen to them. It is part of their

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Speaker 3: job now if they decide to take on board one

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Speaker 3: of the issues represent to them, it's not necessarily because

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Speaker 3: they think it's important to act against climate change. They

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Speaker 3: might do it only because it's what they are paid for.

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Speaker 3: They might do it because they are ambitious. They might

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Speaker 3: do it because they want to say, this is a policy.

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Speaker 3: I made it up, I made it happen. So my

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Speaker 3: job is also to identified what are the different motivations

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Speaker 3: of the people I took to to play with this

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Speaker 3: motivation to push them to act, and I prefer them

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Speaker 3: to be convinced that it's important. But I can also

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Speaker 3: work without that.

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Speaker 1: Right and the CSR Department, the Corporate Social Responsibility Department,

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Speaker 1: was really a branding exercise to ensure just that the

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Speaker 1: reputation of the company is protected. But you're right, this

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Speaker 1: is not just true in financial institutions. It's also true

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Speaker 1: in major corporations that now because of pressure is coming

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Speaker 1: from many different directions, from investors, from governments, from people,

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Speaker 1: if they have customers. There is now a push not

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Speaker 1: just to have a reputational push to try and be green,

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Speaker 1: but a real push to try and be green because

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Speaker 1: there are other pressure points acting on the system.

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Speaker 3: Definitely, and this is why you're sorry. Also, try to

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Speaker 3: mobilize as many stakeholders as possible, cities, companies, employees that

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Speaker 3: can also collectively take a stent to change not only

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Speaker 3: likes a few thousands of a few hundred books that

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Speaker 3: a on on the own bank account, but to change

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Speaker 3: really like big digits.

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Speaker 1: But despite all this progress, you know, you talked about

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Speaker 1: Cop twenty six in Glasgow and how banks committed to

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Speaker 1: try and get to net zero. Then we've seen the

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Speaker 1: invasion from Ukraine as you mentioned, and how that's been

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Speaker 1: used by fossil fuel companies but also the banks that

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Speaker 1: finance them. As a way to slow down this transition.

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Speaker 1: Then there's been political attack on ESG environmental social governance

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Speaker 1: in the US which has forced other financial institutions to

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Speaker 1: reverse their stunts. So, if you were to look at

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Speaker 1: the endgame, which is to start banks from financing fossil fuels,

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Speaker 1: do you think that's feasible and if so, how does

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Speaker 1: that play out?

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Speaker 3: I do think it's feasible if we do a knowledge

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Speaker 3: that there is no transition to be expected from the

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Speaker 3: oling gas industry. When I say oling gas industry, are

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Speaker 3: really mean the upstream industry industries are the corduct extracting

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Speaker 3: fox sale fuels. And I think we got that very

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Speaker 3: clear is on the letters changes even coming from the

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Speaker 3: oling gas major in Europe that were display These companies

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Speaker 3: were displayed as the best in class company, the companies

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Speaker 3: that were building the transition investing in local on activities.

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Speaker 3: But in the past months, Shell, BP and Total Energy

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Speaker 3: all backtracked on the climate commitments, the increase the forsificial

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Speaker 3: production projections, and they still invest like a tiny share

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Speaker 3: of their capex into local activities. So, and I think

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Speaker 3: the financial industry is realizing that we see a lot

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Speaker 3: and lot many more investors, starting with pension funds divesting

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Speaker 3: fully from the industry. We see the banks like BNP saying,

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Speaker 3: like undedicated bonds, I'm not gonna do that anymore because

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Speaker 3: i know it's only worsening the situation. However, what is

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Speaker 3: problematic is that on THG trend has been slowing down action,

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Speaker 3: which actually increase the need for regulation. But what worries

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Speaker 3: me that we are not in the situation Like after

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Speaker 3: Trump's election in twenty seventeen, the industry took a stand

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Speaker 3: to say it's non negotiable. The Paris Agreement is going

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Speaker 3: to be kept. We are mobilized collectively behind it. Today

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Speaker 3: we see a lot of financial institutions and others that

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Speaker 3: are saying that their concerned and worried about this on

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Speaker 3: TG trend, but none of them is taking a star

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Speaker 3: and to say I remain commedity to one point five

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Speaker 3: and it's non negotiable.

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Speaker 1: And there is a chance that Trump does get elected

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Speaker 1: and then comes to power next.

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Speaker 3: Year exactly, so that's really worried. We hope that it

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Speaker 3: might be actually a wake up call for some financial

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Speaker 3: institutions that really realize, like we need to do it.

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Speaker 3: If not, nobody will do it. But here we see

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Speaker 3: a clear divisions between what's happening in the EU and

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Speaker 3: in the US. Like in the EU, financial transtitions know

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Speaker 3: that change isn't available. Inavailable, they will need to change.

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Speaker 3: The question is how the question is when in the

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Speaker 3: US they still think it might be okay, that it's

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Speaker 3: something optional, which is obviously scientifically not optional. But that's

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Speaker 3: rories me like that. The financial sector in North America

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Speaker 3: is really really far behind, not on in terms of actions,

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Speaker 3: but also in terms of understanding of what we are facing.

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Speaker 1: So you've got a big job on your hand.

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Speaker 4: Good luck, thank you, thank you for listening to Zero.

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Speaker 4: And now for the sound of the week.

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Speaker 1: That is the sweet, sweet sound of money coming out

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Speaker 1: from an ATM or a cash machine. The counting of

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Speaker 1: those notes is done by the use of a beam

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Speaker 1: of light and a sensor that sees how many times

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Speaker 1: a passing note blocks it. If you liked this episode,

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Speaker 1: please take a moment to rate and review the show

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Speaker 1: touch at zero pod at Bloomberg dot Net. Zero's producer

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Speaker 1: is Mike Lee. Roud. Bloomberg's head of podcast is Sage

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Speaker 1: Bauman and head of Talk is Brendan Newnan. Our theme

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Speaker 1: music is composed by Wondering. Special thanks to keer up

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Speaker 1: Beyindraim Matthew Griffin, Natasha White and Alastair marsh I am

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Speaker 1: Akshatrati I'm back, so