HSBC to end asset financing for new oil and gas fields and coal mines

The banking giant posted the update earlier today (14 December), building on a commitment made in March to review its financing and investment policies to ensure they are in keeping with global climate efforts. That commitment was made after financed emissions targets for power, utilities and oil and gas were increased in February, but criticised by green campaign groups as misaligned with the Paris Agreement.

In the update, HSBC confirmed that it will “accelerate activities in renewable energy and clean infrastructure” in response to the “urgency” of the global energy crisis. However, it stops short of increasing its 2030 sustainable finance goal, which is set at $750bn – $1trn.

The update also confirmed that HSBC will no longer be providing lending or capital markets finance specifically for activities relating to the development of new oil and gas fields. Companies with oil and gas expansion plans may still be backed by HSBC for more general purposes, but ‘asset-specific’ finance will no longer be provided.

HSBC notes in its update the recommendations for reaching a global net-zero power system by 2050 published by the International Energy Agency (IEA) in May 2021. Rather than emphasising the recommendation for no new oil and gas fields, beyond those already confirmed by the end of 2021, HSBC notes that finance should continue for existing oil and gas fields at 2020 levels through to 2030 in the IEA’s opinion.

All HSBC clients in the energy sector will need to engage with the bank to outline how their plans are aligned with its 2030 goals and the global transition to net-zero by 2050. They will need to do so via transition plans.

“If a transition plan is not produced or if, after repeated engagement, is not consistent with our targets and commitments, we won’t provide new finance, and may withdraw existing financing if appropriate,” the update confirms.

ShareAction has welcomed the move but still wants further action to limit general financing for oil and gas majors planning expansion inconsistent with the Paris Agreement.

The head of the organisation’s banking programme, Jeanne Martin, said: “HSBC’s announcement sends a strong signal to fossil fuel giants and governments that banks’ appetite for financing new oil and gas fields is diminishing. It sets a new minimum level of ambition for all banks committed to net zero.

“We urge major banks like Barclays and BNP Paribas to follow suit.

“However, HSBC’s announcement only applies to asset financing, and doesn’t deal with the much larger proportion of finance it still provides to companies that have oil and gas expansion plans. We expect to see HSBC come forward with new proposals that will address this as soon as possible.”

Scottish Green Party’s economy spokesperson Maggie Chapman MSP voiced a similar opinion. She said: “This is a big step and one that we hope other financial institutions will follow. It should have happened years ago, but it is still welcome, and, just as importantly, it sets a vitally important precedent.

“This decision would not have happened without years of pressure from climate campaigners and activists. This won’t end HSBC’s total involvement in the sector, but it will reduce it and will send a message to the rest of the industry.”

Spotlight on coal

HSBC’s update includes changes regarding how it engages with the coal sector as well as with the oil and gas industry.

One change is that HSBC will exclude finance for new metallurgical coal mines. This will prevent it from getting involved with West Cumbria Mining’s project near Whitehaven, which was given the green light last week despite strong opposition on climate grounds.

Regarding coal mining projects already in HSBC’s portfolio, the bank will use a combination of engagement and divestment to reduce absolute financed emissions from this sub-sector by 70% this decade. The same target is in place for thermal coal-fired power production.

Earlier this year, the UK’s Advertising Standards Authority (ASA) ruled that two adverts placed in the UK by HSBC last autumn were greenwashing, as they could mislead customers into thinking that its financing activities have a net-positive impact on the environment. The Authority ruled that information regarding fossil fuel finance was omitted from the adverts.

HSBC has received much ire from climate campaigners over the years given that it is believed to have provided $87bn in financing to fossil fuel companies between the start of 2015 and the end of 2021.

Fresh outrage was directed at the bank in May, when then-head of responsible investment Stuart Kirk downplayed the financial impact of physical climate risks at a Financial Times summit. Kirk called warnings of the climate crisis “unsubstantiated, shrill, partisan, self-serving and always wrong”.

Kirk subsequently resigned in July and spoke out against “cancel culture” and in favour of “differing opinions” on “saving our planet”.