HSBC draws criticism despite net zero pledge

[LONDON] HSBC has attracted criticism following its recent announcement that it will align the CO2 emissions of the companies that it is financing with the Paris Agreement goal to achieve net zero emissions by 2050 or sooner.

The bank provided up to US$1.8 billion in five bond and loan deals for companies involved in the construction of new coal, tar sands and oil and gas infrastructure and an offshore oil and gas project in the four months running up to its net zero announcement, according to non-profit ShareAction.

"It casts serious doubt over the credibility of HSBC's climate commitments, given that phasing-out financing of fossil fuels is an absolute must for any net-zero strategy," said ShareAction's senior campaign manager Jeanne Martin.

HSBC said it was expanding its capital markets-focused carbon transition policies to all of its activities across financing, asset management, and corporate and retail banking.

"What we have given the market is an ambition that our total financing by 2050 will be net zero, that is a far bigger prize or goal than picking a sub-segment of our portfolio," chief executive Noel Quinn said.

"NEEDS MORE DETAIL"

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Like other banks that have made long-dated 2050 commitments, HSBC is being criticised for a lack of clearly defined interim targets within its pledge, and a lack of detail on how it will align its portfolio to Paris Agreement targets.

"When we look at the commitment itself, we still think it needs a lot of improvement, and a lot more detail on how it's actually being implemented," said Nina Roth, director of responsible investment at BMO Global Asset Management.

HSBC committed to prioritise financing and investment that supports customers in all sectors to transition to a low carbon economy and is aiming to provide US$750 billion to US$1 trillion to fund the move in the next 10 years.

"Whilst HSBC's announcement is detailed when it comes to pledges to provide Paris-aligned finance to clients, we still need more information on what they won't do anymore. I'm particularly thinking of their coal portfolio," Ms Roth said.

HSBC has not financed any new coal fired power plants since April 2018, an HSBC spokesperson said.

HSBC is also setting up a dedicated unit to support cleantech innovation companies and target US$100 million investment in the sector within its technology venture debt fund.

ShareAction highlighted fossil fuel financing including a US$1.24 billion bond by Norwegian oil exploration and development company Aker BP ASA on Sept 22, three weeks before HSBC's net zero commitment, and a US$400 million loan on Sept 18 for Malaysia-listed Yinson Holdings' offshore oil and gas floating production, storage and offloading ship in Brazil.

ExxonMobil also received financing of US$1.25 billion from HSBC at the end of June as part of a US$10 billion loan, and the bank had a leading role in a US$1 billion bond by North American energy company Enbridge on July 5, which is currently building one of the biggest crude oil pipelines in the world.

Also in June, HSBC took part in a US$498 milllion bond for South Korean utility KEPCO, which has 40 per cent of its business reliant on coal. In February, international funds cut their holdings over its lack of progress on reducing carbon emissions.

"If you have a high level commitment, but you don't have it integrated in your internal systems, these transactions will happen," an investor said.

"We have been engaging for 18 months, but we're still missing detailed information to assess the emissions that the banks have financed."

REUTERS