London-based sustainability leader HSBC, is one of the world’s largest banking and financial services companies. The banking giant is helping the world to transition to a low-carbon economy and promoting sustainable growth. The company’s updated climate plan enhances and already strong commitment to meet their social, environmental and governance (ESG) responsibilities. The new plan includes $100B for sustainable financing by 2025.
Over the last ten years HSBC has financed some of the biggest climate-focused infrastructure projects in the world. They are also focusing on reducing their in-house footprint. In the past year alone HSBC has reduced carbon emissions by 9 percent, water usage by 9 percent and energy consumption by 13 percent. HSBC is consistently ranked in the top ten for the financial sector in both performance and disclosure according to CDP Global 500 Climate Leadership Index.
In November, HSBC committed to provide $100 billion in sustainable financing and investment by 2025. This includes increased financing of clean energy and low-carbon technologies, and projects that support the UN’s Sustainable Development Goals (SDGs). HSBC’s Group Chief Executive Stuart Gulliver said the firm is committed to being a key player in the push towards a low-carbon economy.
“The $100 billion commitment that we are announcing today acknowledges the scale of the challenge in making a transition to a low-carbon future,” Gulliver said.
In the last decade HSBC has issued $580m of green bonds (financial instruments that generate investment capital to combat climate change). In 2014 HSBC signed on to a set of principles for green bonds that was agreed upon by environmental groups, investors and issuers. These principles revolve around three primary recommendations: Transparency, disclosure and integrity.
Transparency and reporting
HSBC is increasing its ambitions with regard to both transparency and disclosure. As part of its new climate plan HSBC announced that it will adopt a set of recommendations that help companies address climate risks. The recommendations are from the FSB Task Force on Climate-related Financial Disclosures (TCFD) 2018 report.
Science and research
HSBC responded to the 2013 IPCC fifth Assessment Report by mirroring the salient findings in two reports of their own. All these reports acknowledge the material threat posed by climate change. HSBC climate change center head Nick Robins said: “The key thing now is taking this very high quality science and then translating it into a risk management strategy for business which is [a] question both of size of impact and the probability of impact. We actually need to avoid not just the most likely scenarios but those long-tail high-impact scenarios as well.”
HSBC has announced that they are weaning itself off of fossil fuels starting with reducing its exposure to thermal coal project financing. The finance company plans to progressively transition away from other carbon-intensive sectors.
HSBC has also advanced research related to fossil fuels and stranded assets. HSBC and Aviva have funded a four-year research programme at Oxford University into the risks posed by stranded assets.
“The regular process of economic evolution is that businesses are left with stranded assets all the time,” says Nick Robins, who runs HSBC’s Climate Change Centre. “Think of film cameras, or typewriters. The question is not whether this will happen. It will. Pension systems have been hit by the dot-com and credit crunch. They’ll be hit by this.”
HSBC is also studying the long-term value of fossil fuels and they have expressed concerns about the risks posed by oil valuations. Analysts at HSBC have stated that when the world gets serious about tackling climate change fossil fuels values will fall significantly. They have warned that only a fraction of known fossil fuel reserves can be safely burned. However, HSBC is also financing the Dakota Access Pipeline (DAPL).
HSBC provides financing for a number of renewable energy projects including India’s 120 country solar energy alliance. The bank is also leading by example. They have publicaly announced ambitious renewable energy targets. HSBC now sources almost one quarter (24%) of its electricity from renewables. As a member of RE100, HSBC has vowed to source 100 percent of its electricity from renewables by 2030, with an interim target of 90 percent by 2025. To help them realize this goal the finance giant has signed a number of agreements with clean power producers. While energy purchase agreements are part of the solution HSBC is also planning to develop on-site renewable energy power facilities.
Promotion and support
HSBC is not only financing the low-carbon transition and acting internally to reduce their footprint, they are committed to being a key player that shapes the discussion on sustainable finance and investment. This includes promoting industry-wide definitions and standards.
“We are committed to being a leading global partner to the public and private sectors as they make that transition,” Gulliver said.
HSBC is not only a leader in the drive to finance the transition to a low carbon economy they are actively promoting sustainable development and helping stakeholders to manage transition risks.
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