Whatever the courts decide, the three non-governmental organisations (NGOs) suing BNP Paribas for failing to take sufficient action to end fossil fuel financing probably consider that they have already won, say lawyers from Linklaters, thanks to the publicity the case has generated and the increased pressure on banks to align policies with climate science. Banks that greenwash or whose actions appear not to meet due diligence laws are almost certain to face similar legal action, they warn.
In February, Friends of the Earth France, Oxfam France and Notre Affaire à Tous announced they were taking France’s biggest bank – the world’s largest funder of European and US oil and gas majors – to court under France’s Corporate Duty of Vigilance Law. Introduced in 2017, the law requires large companies to identify and prevent risks to human rights and the environment. As the world’s first climate lawsuit against a commercial bank, the case has received significant media coverage.
“From the NGOs’ point of view, it is not that important whether they win the case,” says Jean-Charles Jaïs, a dispute resolution partner at Linklaters in Paris. “It will take two to three years before the decision is rendered and to some extent they consider they have already won with the publicity surrounding the action and the communication impact.”
Regardless of the outcome, such actions are “changing the global mindset all the way up to the level of CEOs”, says Mr Jaïs. “These topics are not argued in the same way as they were before.”
Mr Jaïs suggests the case is the start of a wider trend. “We cannot exclude that other legal actions and formal notices are in store and could concern other banks,” he says. “NGOs see the targeting of funders and banks as an efficient way to combat climate change.”
With this in mind, all banks should have robust vigilance plans, he says. “Robustness is not necessarily what the public sees, but also the work that has gone on behind the scenes,” he insists.
Mr Jaïs warns financial institutions against “vigilance washing”, where action plans are “blatantly just communication with no substance behind them; this is where liability will arise”. Public-facing communications around these plans should strike the right balance between not saying enough and saying too much, he says. They should be “detailed enough to show all relevant topics are addressed, but should not go into too many details and run the risk of handing NGOs a legal case on a platter”, he adds.
Complacency is not an option
Mr Jaïs is clear that banks cannot be complacent. “What was considered right a few years ago is not OK any more,” he says. “A few years ago you could easily say you were carbon neutral because you had planted trees somewhere in the world. Today you have to do more than that even if you have a certification.” Likewise, once banks have plans and policies in place, they must regularly update them “as things move very fast”.
Other EU countries are adopting similar legislation to France, and the EU is in the final stages of negotiating its Corporate Sustainability Due Diligence Directive, which could require companies to introduce climate transition plans. Across the Atlantic, “we see pressure on Canadian banks and in American banks; in-house lawyers are scrutinising communications related to the environment and checking whether they are greenwashing or could be seen as greenwashing”, adds Mr Jaïs.
to avoid these challenges, banks must act decisively to close loopholes in their policies
Since October 2022, when the three NGOs gave formal notice to BNP Paribas asking it to comply with obligations under the duty of vigilance law, certain French banks have updated their climate plans. In line with their commitments as members of the Net Zero Banking Alliance, Crédit Agricole and La Banque Postale have since published objectives for various energy intensive sectors with the aim of reaching climate neutrality by 2050.
Jamie Sawyer, a lawyer with NGO ClientEarth, says the BNP Paribas case proves that “banks continuing to fund fossil fuel expansion run a real risk of breaching their legal responsibilities to mitigate climate risks and prevent harm to the environment and human rights, not to mention the commercial pitfalls of inadequate risk management”.
Despite climate science showing new fossil fuel fields are incompatible with limiting global warming to a 1.5C temperature rise, “Europe’s largest banks continue to financially support companies that have oil and gas expansion plans with no strings attached”, says Jeanne Martin, head of banking programme at UK campaign group ShareAction.
“As the most damaging impacts of the climate crisis, like extreme weather and flooding, are felt, banks are likely to face growing climate-related legal risks for their part in driving new fossil fuel production,” says Ms Martin. “If they wish to avoid these challenges, banks must act decisively to close loopholes in their policies, introducing restrictions on corporate finance and requiring mandatory transition plans for their oil and gas clients.”
Aligning investments with climate science is not the only environmental, social and governance issue banks need to have at the forefront of their minds, adds Mr Jaïs. “Biodiversity is the latest trend and it is coming fast,” he says, suggesting financial institutions would be wise to adopt a policy of “anticipation” rather than “cure”.
