06/06/2017 (Business Green) - BNP Paribas has announced a new set of guidelines requiring palm oil companies to meet strict standards on forestry protection and emissions in order to secure financing from the French bank, as it aims targets reaching 'carbon neutral' by the end of 2017.

Under the bank's new policy, palm oil companies must be members of the Roundtable on Sustainable Palm Oil industry group and have a time-bound plan for full RSPO certification of their operations as a pre-condition for gaining financing.

The guidelines also require palm oil firms to have a raft of policies in place aimed at minimising greenhouse gas emissions from their operations, including commitments to no burning for the development of palm oil plantations, no development on peatlands, minimal use of artificial fertilisers and cutting emissions from palm oil mills.

The standards set out in the new document "have to be met without exception before BNP Paribas considers providing financial products and service to palm oil companies", the document states.

It represents a major victory for climate campaigners who have long been calling for banks to scrutinise more carefully the impact their lending practices have on endangered habitats.

It also follows HSBC's 'No Deforestation, No Peat, No Exploitation' policy, which was announced in February following pressure from campaigners over allegations the bank had been financing palm oil companies with links to deforestation.

In addition to the mandatory requirements, BNP Paribas has also developed criteria to assess palm oil companies to which it lends. "Based on the results of such complementary due diligence, BNP Paribas reserves its right to call for additional requirements or decline its involvement even if the mandatory requirements are met," the new policy states.

Deborah Lapidus, campaign director of green group Mighty Earth, described BNP Paribas's new palm oil policy as a "breakthrough in forest-friendly finance" and called on all major global financial institutions enhance their green policies on lending.

"BNP Paribas' new policy charts a new path for responsible financing that all major financial institutions should follow - or else face the growing consumer backlash against environmentally destructive institutions," Lapidus wrote in a statement. "But financial institutions aren't only worried about being the target of a public campaign. They are also beginning to respond to the reality that investing in deforestation is risky business."

She added: "Deforestation—once seen by agribusiness titans and their financiers as a cheap and easy way to make huge profits—is increasingly becoming a major business liability. More and more banks don't want to do deals with companies pursuing outdated and high-risk business models."

The new palm oil policy comes as BNP Paribas today pledged an additional €6m through its Climate Initiative programme to support eight projects over the next two years, with research covering the climate change impacts on Antarctica, coral reefs and agricultural soils in Africa among other issues.

The bank is already targeting 'carbon neutral' status throughout its own operations by the end of 2017. BNP Paribas said last month it planned to reach the goal by reducing its own emissions by 25 per cent per employee between 2012 and 2020, as well as working to offset any remaining CO2 that "cannot be directly avoided or easily reduced".

The bank explained that as more than half of all its emissions derived from its electricity consumption, it was also committed to using only low carbon electricity "in all countries where it is available".