Battle for green bond deals heats up as BNP Paribas hits top

[LONDON] Competition for selling green bonds is heating up, with this year's current leader BNP Paribas trying to stay on top by targeting new business from heavy polluters.

The French lender has beaten JPMorgan Chase to first place in Bloomberg's corporate and government global green bonds league table so far in 2022. Maintaining that through the year would end the US bank's 2-year hegemony. HSBC Holdings is also a challenger, having displaced Citigroup in the third spot.

"Staying at the top of the league table is an approach we have across sustainable finance - not only bonds, and loans, but also being active in derivatives, repo markets," said Agnes Gourc, BNP Paribas' head of sustainable capital markets. The bank's focus on sustainable finance has been a priority for a "number of years".

It is now big business, with Moody's ESG Solutions forecasting that green bond sales this year will hit US$775 billion, up from over US$500 billion in 2021. Banks earned an estimated US$3.4 billion from green-labelled debt deals last year, more for the first time than they did helping fossil-fuel companies raise money, according to data compiled by Bloomberg.

Lenders and investors are also coming under pressure from regulators to clean up their portfolios and disclose climate risks. Stricter global policy making is being led by the European Union, potentially giving an edge to the region's banks in winning environmental business.

BNP Paribas has placed its sustainable finance franchise in the bond business itself, meaning that all originators and syndicate bankers "really understand" the product very well, said Gourc, who has been working in the sector at the bank since 2016. They also needed to understand what individual companies were implementing - and what they are not doing. "You can't have a cookie cutter approach when it comes to sustainable finance," she said.

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Its recent deals include green bonds for Italy's Terna - Rete Elettrica Nazionale, E.ON SE and Ile-de-France Mobilites, and it expects particular growth in sustainability-linked bonds.

Those appeal to companies putting a focus on longer-term evolution, as well as to high-yield issuers, she said. Yet in some cases, such debt has been controversial on concerns that they are being linked to targets that are too soft or that firms already plan to reach. BNP Paribas is now proactively looking at clients where there is still ESG potential.

Fossil-fuel companies doing green bonds have traditionally been frowned upon, though Nomura International said it is now talking to gas industry clients over green bond sales after the EU included some gas projects in its rule book for what counts as sustainable.

"In the last 2 years, almost every client has had ESG on their minds," Gourc said. "The focus will be to also address the heavy carbon sectors and see what we can really do there." BLOOMBERG