BNP Paribas will end business with companies whose primary activities involve profiting from the extraction of oil or gas from shale or tar sands, while ramping up its investments in renewable energy.
The international bank, whose asset management and custodian subsidiaries act for a number of UK pension funds, announced the drive in order to help meet its environmental, social and governance (ESG) commitments under the United Nations' Principles for Responsible Investment.
It will no longer work with companies whose main business includes exploring, producing, distributing, marketing or transporting oil and gas extracted from shale or tar sands.
The bank will also end financing of gas or oil exploration or production projects in the Arctic, and will reduce its support for coal mines and coal power generation. Meanwhile, it will increase its financing of renewable energy to €15bn (£13.4bn) by 2020, and commit a further €100m (£89.5m) to invest in energy transition start-ups.
Chief executive Jean-Laurent Bonnafé said the bank was committed to its ESG obligations.
"We're a long-standing partner to the energy sector and we're determined to support the transition to a more sustainable world," he said. "As an international bank, our role is to help drive the energy transition and contribute to the decarbonisation of the economy.
"As we have announced, we're committed to working with and supporting those energy sector partners who have decided to make environmental issues a central part of their business policy."
The bank's securities services division was last month appointed to provide custody services, investment accounting, investment reporting, and performance services for the £3bn West Sussex Pension Fund.
ShareAction banking project manager Sonia Hierzig said pension savers will benefit from the reduced climate-related risk.
"We welcome the decision announced by BNP Paribas today," she said. "This represents a considerable step towards aligning the bank's activities with the goals of the Paris Agreement.
"Millions of people will be impacted by how the largest global banks respond to climate change, not least because their pension savings are to a large extent invested in the financial services industry. It is therefore important to monitor the actions taken by banks and to ensure they manage their climate-related risks and opportunities appropriately."
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