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HSBC bows to investor pressure on capital markets issuance

by SuperiorInvest

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HSBC will begin disclosing off-balance sheet emissions in its annual report later this month, after investors pressured the bank to stop omitting swaths of data from its climate calculations.

The change means the UK’s largest bank will now include emissions linked to the capital raises it advises fossil fuel companies on, an area that investors have until now seen as a climate blind spot for banks.

Banks typically include a portion of their customers’ emissions in their carbon footprint, based on the loans they grant to the company. But that calculation tends to include only loans, not issuances linked to capital markets transactions in which a bank helps its clients obtain financing by issuing stocks or bonds, for example.

Banks “have a habit of sweeping their actions and impacts under the rug,” said one asset manager who raised the issue of disclosure with HSBC. “When we talk about carbon emissions related to finance, we have a habit of avoiding facilitated emissions, which is worrying.”

Although HSBC scores relatively highly for the proportion of green deals it facilitates relative to fossil fuel deals, according to analysis by the Anthropocene Fixed Income Institute, it has maintained ties with companies that pump, move and sell fuels from new oil fields. and gas despite a commitment to stop financing them directly.

Last year, HSBC worked on a $3 billion raise for Greensaif Pipelines Bidco, which has a 49 percent stake in Saudi Aramco’s gas pipelines, and was among banks that arranged a $3.3 billion revolving credit facility. dollars for the Italian company Eni, which is also expanding its oil and gas production. The bank declined to comment on these relationships, but said it was seeking to “avoid an overnight exit from banking oil and gas producers.”

The difference in the way banks account for emissions is due to the less interventionist role banks play in capital markets compared to lending, Céline Herweijer, HSBC group chief sustainability officer and committee member, told the Financial Times. bank executive.

“These topics sometimes occupy hours, days or weeks in our books,” Herweijer said. “In the same way that the corporate lawyer is involved in that transaction, or one of the big four accounting firms is involved. . . They are facilitating the transaction. “Actually, this is not our financing.”

“It was always the intention” that HSBC’s climate targets would eventually include facilitated emissions disclosures, he added.

Other banks, including NatWest and JPMorgan, already publish their so-called facilitated issues. But only a handful, including Barclays and Wells Fargo, include lending and capital markets activities in their aim to reduce their oil and gas sector carbon footprints in absolute terms, as HSBC is expected to do.

HSBC released facilitated emissions as a one-off in 2022 after an activist campaign, which showed its capital markets activity for oil and gas clients was linked to carbon and gas equivalent emissions of 29.5 million tonnes in 2019, compared to 35.8 million tons for loans.

Only a relatively small proportion of the oil and gas sector’s facilitated emissions are likely to end up on HSBC’s books. The bank has said it will back an accounting technique agreed by an industry standards-setting group led by Barclays and Morgan Stanley, which agreed in December that banks could choose to take responsibility for all or just a third of linked issues. to capital market agreements. .

Campaigners, including ShareAction, say this falls short of recognizing the crucial facilitating role that banks play in the energy transition. HSBC takes full credit for the deals in tallying progress toward its goal of providing up to $1 trillion in clean energy and other green deals by the end of the decade.

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