HSBC and Barclays get serious about ESG commitments
The two largest UK-headquartered banks have announced major new sustainable finance commitments as the finance industry continues to align its resources to support the clean energy transition and turn away from new fossil fuel extraction.
HSBC reinforced its commitment to deliver net-zero emissions by 2050 by committing to stop providing new lending or capital markets financings for projects related to new oil and gas fields and their infrastructure, in addition to maintaining its sustainable financing commitments.
Barclays, meanwhile, said that it plans to provide US$1trn by the end of 2030 as sustainable finance or for companies transitioning to lower-carbon use, and will ramp up the number of debt and equity capital markets professionals dedicated to meeting that goal.
HSBC said its new energy policy aims to help reduce the financed emissions of its energy sector clients, including companies that are trying to reduce carbon emissions.
“Our aim is to be at the heart of supporting and accelerating the energy transition across the markets we serve. We will work with our energy clients to support them in their transition towards a clean energy future,” Alexi Chan, head of global banking sustainability at HSBC, told IFR. “Alongside our new policy, and given today’s global energy crisis, we plan to accelerate our activities in renewables, clean energy and clean infrastructure.”
HSBC will stop new lending and capital markets financings relating to oil and gas projects where the primary use is in conjunction with new fields. But the bank will continue to provide financing or advisory services to energy clients at the corporate level, where transition plans are consistent with a commitment to net-zero emissions by 2050.
"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," HSBC said in a statement.
Responsible investment lobby group ShareAction welcomed the move. “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," said Jeanne Martin, head of ShareAction's banking programme. "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."
Maude Lentilhac, an analyst with Reclaim Finance, an NGO affiliated with Friends of the Earth, agreed that Barclays needs to up its game. "Barclays is still lagging on this issue," she said.
HSBC previously said that it plans to provide US$750bn–$1trn in sustainable finance and investment by 2030.
Critical role
Barclays' new US$1trn target marks a big increase from the goal set in 2018 to deliver £150bn of social and environmental financing by 2025, which the bank said it has already passed. The new target starts from 2023.
"Barclays will continue to invest in its product platform to facilitate this US$1trn of financing, including expanding sustainable debt financing and equity capital markets activity," the bank said in a statement. It will invest across business lines, geographies and sectors.
The bank said it will also increase its own equity capital investment into global climate technology start-ups. It now plans to invest £500m in sustainable investments by 2027, up from its previous target of £175m by 2025.
The bank said its US$1trn target spans the long-term green, social, transition and broader sustainability-linked financing requirements of corporates, governments and consumers. It includes green mortgages, financing for renewable energy firms and sustainability-linked structures.
Barclays has already invested £84m to scale up start-ups, including investments in property retrofits and long-duration energy storage and hydrogen technologies. The next phase of investments will increase the focus on decarbonisation technologies – notably carbon capture and hydrogen – for carbon-intensive sectors, such as energy and power, real estate and transport.
"Many of the technologies that are required to achieve net zero have not yet reached commercial scale. Barclays can play a critical role through leveraging our experience as an adviser, bank, and investor," said Daniel Hanna, head of sustainable finance for the corporate and investment bank.
He said the push is part of the broader effort after policymakers at the UN's COP27 climate summit estimated that US$4trn–$6trn needs to be invested annually in renewables and decarbonisation until 2030 to help reach net-zero emissions by 2050.
Falling short
Despite these signs of progress, ShareAction said that Europe's top banks are still falling short on climate and biodiversity action and urgently need to improve their practices and close loopholes to meet internationally agreed standards to deal with the climate crisis.
ShareAction has ranked Europe's top 25 banks based on their performance on key climate and biodiversity metrics. BNP Paribas was first with an overall score of 63%, while Barclays was fifth at 50% and HSBC was eighth at 47%.
Other banks are announcing portfolio targets for high-emitting sectors as part of their commitment to the Net-Zero Banking Alliance (part of the Glasgow Financial Alliance for Net Zero), which involves calculating financed emissions and ultimately their carbon footprints.
Credit Agricole said in December that it has stopped financing new oil extraction projects and outlined plans to cut emissions linked to loans in five high-emitting sectors. Deutsche Bank and Societe Generale announced targets in October to reduce emissions from their highest emitting sectors. The same month Lloyds said that it would not support the direct financing of new oil and gas developments. ING made a similar commitment in March.
As ever, the devil is in the detail. Portfolio targets typically give a partial picture as they do not cover so-called facilitated emissions from underwriting and other capital market activities, and exclusionary policies still allow banks to finance clients that are expanding fossil fuel production. Implementing, measuring and monitoring the commitments will therefore be key.
Barclays has revised its sustainable finance framework with support from Sustainalytics and is also developing a transition finance framework to identify ESG-labelled transactions that are eligible under its new target, and will publish progress against these targets alongside financial reporting.
HSBC's updated energy policy says that the bank will assess its clients' transition plans via independent external reviews if necessary.
