D&O cover crucial as European climate related lawsuits increase
BNP Paribas, the Euro zone's biggest bank, is being sued by French campaigners for financing fossil fuels in the first climate-related lawsuit against a commercial bank.
Oxfam France, Friends of the Earth France and Notre Affaire à Tous argue that BNP Paribas facilitates loans to oil and gas firms and, therefore, breaches a legally binding duty in France to ensure its activities do not harm the environment.
The bank must now defend its record in the French courts after the lawsuit was filed in Paris. Under France’s corporate Duty of Vigilance law, all large businesses headquartered in France and international corporations with a significant presence there must set out clear measures to prevent human rights violations and environmental damage.
This move follows activists ClientEarth and other claimants starting legal action in a Paris court against Danone, the global food products company. They claim Danone breached the Duty of Vigilance Act because it does not have an adequate plan to reduce its plastic footprint.
In a statement, BNP Paribas said it regretted that the NGOs had chosen to engage in litigation rather than dialogue. In a statement it said: “BNP Paribas, like other major international banks, is a longstanding financier of energy production. Approximately 10 years ago, 95% of our outstanding financing for energy production financed fossil energy projects. Today, already more than half of our financing for energy production is oriented towards low-carbon energies.”
BNP Paribas clients include Total, Chevron, ExxonMobil, Shell, BP, ENI, Repsol and Equinor. These companies are reportedly involved in more than 200 new fossil fuel projects scheduled for approval by 2025, which is estimated would collectively produce about 8.6bn tonnes of carbon dioxide.
In 2021, the bank joined the UN’s Net Zero Banking Alliance but Lorette Philippot of Friends of the Earth France, has accused BNP Paribas of “ignoring scientific truths”.
BNP Paribas was served notice that the NGOs were prepared to take legal action last year and in January it promised to cut financing for the extraction and production of oil by 80% and gas by 30% by 2030.
Alexandre Poidatz, advocacy officer at Oxfam France, said BNP Paribas "continues to write new blank cheques to the largest fossil fuel companies without setting any conditions for an oil-free, gas-free ecological transition".
The threat of legal action makes it increasingly important directors and officers have in place comprehensive D&O insurance and may agree to the appointment of panel defence counsel in move that could help control defence cost inflation.
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