CORRECTION - HSBC increases ESG focus on smaller companies
Natalie Blyth is leading HSBC's drive to accelerate sustainability across 1.4m companies in its commercial banking division, the unit that looks after its midcap and small business clients.
An estimated US$25trn–$50trn of the US$100trn of investment needed to deliver net-zero supply chains will have to be directed towards SMEs, which make up 90% of supply chains, according to research by the Global Financial Markets Association and Boston Consulting Group.
While ESG is well developed and resourced in large multinational companies, it is at a far earlier stage at smaller companies, which are therefore at greater risk of failing to transition to a net-zero world – leaving lenders sitting on so-called stranded assets that they have to write down.
“If we can transition all clients, avoiding stranded assets, this would have the greatest positive impact in reducing emissions," Blyth said.
Blyth was appointed to a newly created role as global head of commercial banking, sustainability in mid-January. She was previously global head of trade and receivable finance.
HSBC's commercial banking unit provided US$13.4bn of the bank's net operating income in 2021 – 27% of total revenues of US$50.1bn. Global banking, the division that handles the largest companies, had net operating income of US$6.6bn, or 13% of total revenues.
Blyth's role also spans diversity and inclusion and she is aiming to use technology to bring minorities and women into the financial system through supply chain financing, a process she describes as "supporting financial inclusion for new clients".
Smaller companies have particular risks because they may not have the resources to demonstrate their ESG credentials. "Small companies can find themselves excluded because they cannot prove their sustainability credentials to buyers," Blyth said.
HSBC is aiming to provide US$750bn to US$1trn of sustainable finance by 2030 (including underwritten deals as well as lending). It provided or facilitated US$83bn of sustainable finance and investment in 2021, including US$46.8bn of green, social, sustainable and sustainability-linked bonds, which took its cumulative total to US$127bn at the end of last year.
Blyth is also calling for the banking industry to collaborate and create new financing structures to move forward faster in a bid to close the funding gap to developing countries, which the OECD estimates at up to US$4.2trn between the annual financing needed to meet the UN's Sustainable Development Goals by 2030 and necessary current investment levels following the pandemic.
"Trillions of dollars of transition financing is required and we need fair and appropriate forward-thinking capital treatment to finance critical long-term climate tech infrastructure projects," she said.