Is HSBC Really the Right Bank to Spearhead New Global “Sustainable Finance” Rules?

The UK-based lender, with one of the longest rap sheets in the banking world, is one of a number of big banks leading efforts ostensibly aimed at greening global finance.     

HSBC has yet another scandal on its hands. This time, it has nothing to do with making financing easier for Mexico’s drug traffickers. Or facilitating money laundering for Islamist terrorists. Or rigging commodity prices, currency exchange swaps or benchmark interest rates. Or “misselling” wholly inappropriate financial products to small business customers. Or for that matter, helping the world’s wealthiest individuals and families avoid paying taxes just about anywhere in the world, including by allowing its Swiss clients to withdraw “bricks of cash”, often in foreign currencies of little use in Switzerland.

No, this time the UK-based (but largely Asian-oriented) lender is accused of attempting to dilute action on climate change through its role as a steering member of an industry-led alliance of banks and financial institutions supposedly committed to averting  disaster. That’s right: HSBC is now reportedly trying to forestall action on climate change, while at the same time trying to greenwash itself into the hearts and minds of global citizens.  

Dirty Dozen

HSBC allegedly wrote to the Net-Zero Banking Alliance (NZBA) on behalf of 12 large banks, including three of the world’ four biggest funders of fossil fuels (JPMorgan Chase, Citi and Bank of America), asking the alliance to loosen restrictions and delay deadlines in order to keep the banks from having to commit to far-reaching climate action. This is according to new reporting by the Bureau of Investigative Journalism (BIJ):

These appeals came in an email sent from the office of HSBC’s chief executive to the Net-Zero Banking Alliance (NZBA), an initiative launched by Mark Carney, the former governor of the Bank of England. The NZBA brings together more than 50 banks, including HSBC, Bank of America, Barclays and Santander, requiring them to set a target to cut carbon emissions from their lending and investment portfolios to net zero by 2050, as well as setting an interim target for 2030.

The email, which was sent on behalf of a group of 12 banks, said they should have three years from signing the NZBA commitment – rather than 18 months – before setting their 2030 target. It tried to further weaken the commitment by discarding a requirement for science-based targets…

HSBC has been one of Europe’s biggest funders of fossil fuels, ploughing £17.3bn into the sector in 2020 and helping the world’s most polluting company raise £10.3bn. The email came from the office of HSBC’s chief executive, Noel Quinn, who is also chair of the Financial Services Taskforce (FSTF), a group convened by Prince Charles.

HSBC staff coordinated the FSTF’s 12 member banks when the taskforce was first set up this year Quinn said the FSTF is “committed to accelerating efforts within the banking sector […] to move towards a net-zero economy”. But rather than accelerating efforts, the coalition lobbied for longer deadlines and argued against the mandatory use of science-based scenarios to set targets..

Putting the Financers of Pollution in Charge

Since Paris 2016, some of the world’s largest banks and asset management firms, which have been financing the world’s biggest polluters for decades, have not only been contributing ideas on how to rewrite the rules of finance to make the economy more sustainable; they have taken over the entire show, as the Transnational Institute recently warned in its recent report, COP26: Financiers of Polluters in Charge:

Since the agreement in Paris in late 2015, different constellations of financial corporations have worked to define methods for banks, investment funds, insurance companies and others to address the threat of a deeper climate crisis. Much of this work now, controversially, forms part of the official UN process. Not only this, but the corporations have been invited in not just to contribute to the event, but in fact to take over the implementation of the UN agenda on private finance and climate change. When the light is turned off and the doors are shut at the conclusion of COP26, the likes of BlackRock, Bank of America, Citigroup and Santander will take it from there.

This turn of events should not come as a surprise, perhaps. For decades now, the UN system has seen an increasing trend of forming alliances with all kinds of big business groups, depending on the agenda. On climate change we find the Race to Zero campaign at the heart of an effort to involve businesses directly in international decision-making, and more specifically on the oil and gas industry, there is the Oil and Gas Methane Partnership. This approach, sometimes dubbed multistakeholderism (or corporate multistakeholderism), has now reached the private finance agenda of the global climate change talks, and it is taken to extremes.

In some quarters there will be nods of appreciation when COP26 sees a parade of financial corporations committing to “net zero by 2050”. Hundreds of financial institutions have signed up to UN-convened coalitions of companies promising to do their bit to fight climate change. But there are three serious problems with this approach: first, the commitments are so vague that they open the door to a potentially massive greenwash. Banks, asset managers and investment funds with massive holdings in fossil fuels and no concrete ambitions to change course can exploit the UN’s programme to strengthen their image. Second, there is a risk that the presence of private finance in the overall architecture will be used by high-income countries to scale down their own financial commitments. Third, the corporations are not only signing up to statements and making commitments, they are in fact taking over the whole show.

HSBC itself will wield a significant amount of influence over proceedings, through its role as one of just seven “principal” banks in the Glasgow Financial Alliance for Net Zero (GFANZ), an industry-led and UN-convened” consortium of over 450 private banking and financial institutions. The group was established in April with the mission to overhaul the role of global and regional financial institutions as part of a more comprehensive plan to “transform” the global financial system. To that end, it says it will deliver more than $130 trillion of financing between now and 2050.

The organization’s other six principal banks are Santander, Natwest Group, Macquarie, Bancolombia, Citi and Bank of America. Also involved in the group’s decision making will be the CEOs of BlackRock and the London Stock Exchange Group. 

Citi was the second largest bank-roller of fossil fuel businesses between 2016 and 2020, according to the Banking of Climate Chaos report; Bank of America was the fourth [the league table of the 60 biggest financers of fossil fuel activities is on pages 7-8 of the report and is well worth a perusal]. In other words, two of the world’s biggest financers of global polluters are now helping to rewrite the laws of global finance, ostensibly to promote the transition toward a net-zero economy. The new rules being crafted will also intensify the financialisation of nature as well as further erode national sovereignty in the developing world, writes investigative journalist Whitney Webb.   

Financing Environmentally Destructive Activities

As for HSBC, it has a long, storied history of financing environmentally destructive activities. And it shows little sign of wanting to change that behavior.

In 2012, the bank was outed for bankrolling four Malaysian logging companies accused of causing widespread deforestation and human rights abuses. More recently, it was among a handful of global mega-lenders, including JPMorgan Chase, BNP Paribas, Deutsche Bank, Rabobank and Bank of China, exposed for funding 20 of the worst offending agribusinesses tied to deforestation. The investigation, by Global Witness, suggests that financial institutions in the UK, Europe, The US and China are likely to have made $1.84 billion in income from their investments in destructive agribusiness. The deals analysed, worth a total of $157 billion, were struck since the 2016 Paris Climate Agreement, when many banks and investors vowed to bring their lending practices in line with its stated aims.

The investigation underscores the still glaring disconnect between many banks’ heavily marketed public commitments and their actual lending and investment decisions and actions. The biggest offender was JPMorgan Chase, which made deals worth $9.38 billion. HSBC was the largest UK-based financer of destructive agribusiness, striking deals worth $6.85 billion.

“The commodities, the things that drive the destruction of tropical rainforests are beef, soy, palm oil crops. And all of those are incredibly finance intensive,” said Kenza Bryan, report author and investigator at Global Witness. “Without the backing of the finance system, these commodities wouldn’t be produced and they wouldn’t be produced on deforested land so we show all the ways in which the financial sector and the city of London are driving tropical deforestation.”

In January this year, HSBC faced shareholder pressure to toughen its commitment to reduce its lending to fossil fuel-linked companies as well as turn its climate “ambitions” into binding targets. In response, the bank pledged to phase out its financing of coal-fired power and coal mining by 2030 in developed economies, and by 2040 elsewhere in the world. However, the pledge will not extend to the lender’s $612 billion asset management arm, which according to the Guardian is set to invest in companies with plans to build more than 70 new coal power plants in developing countries.

Greenwashing Gone Wild

In the meantime, HSBC has been blitzing cities in the UK with billboard adverts stressing the importance of climate change.  The ads, seen at bus stops in Bristol and London in October 2021, displayed imagery of wind turbines and tree rings, with claims about planting trees and reaching ‘net zero’, and the tagline “Search HSBC Sustainability”. What the ads fail to mention is that HSBC is the 13th biggest funder of fossil fuels on the planet and the 6th largest global lender to the plastic supply chain. Again, the three biggest are American, with Bank of America first, Citi second and JPMorgan Chase third.  

HSBC’s shameless greenswashing has triggered a fierce backlash. The website Adfree Cities submitted an official complaint to the UK Advertising Standards Authority (ASA) over the bank’s “misleading out-of-home greenwash advertisements”. The bank’s offices in Canary Wharf were also targeted by extinction rebellion activists in April. On the other side of the planet, 17-year old snorkel instructor Ava Shearer, from Port Douglas, Queensland, filed a complaint with Australia’s advertising regulator against HSBC’s “misleading” adverts promoting their Great Barrier Reef credit scheme.

Shearer’s action inspired two UK groups, Brandalism and Fossil Free London, to launch a guerilla art campaign of spoof HSBC adverts at over 50 billboards and bus stops in London, Brighton and Bristol. One of the parody ads contrasts HSBC’s professed commitment to protecting the Great Barrier Reef and its bankrolling of the Adani Group’s highly controversial Carmichael coal mine on land that belonged to indigenous Wangan and Jagalingou communities until the Queensland authorities revoked their title in 2019.

“HSBC’s ads claim it is investing in the future of the Great Barrier Reef when in reality it is investing in the destruction of the Great Barrier Reef by investing in the Adani Group and its disastrous Carmichael coal mine,” Shearer said. “By financing fossil fuel projects and investing in climate wreckers like the Adani Group, HSBC is doing more damage than good to the Great Barrier Reef. HSBC need to be held accountable for their blatant greenwashing.”

Tellingly, the U.S. lender BNY Mellon announced a week ago that it would no longer provide financial services to Adani’s Australian operations, on the grounds that the Indian mining conglomerate’s Carmichael venture is incompatible with its environmental, social and governance rules. HSBC, judging by its past and recent form, is unlikely to do the same.