Clouds hung over Paris on December 12, 2015, yet inside, at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change (UNFCCC), upon hearing the adoption of the first universal climate deal, a huge cheer reverberated around the hall from thousands of delegates. Representatives from almost 200 countries gave a standing ovation. There were hugs, there were smiles and one woman looked to the skies with gratitude.
A historic, legally binding climate deal to hold global temperatures to a maximum rise of 1.5C above pre-industrial levels, staving off the worst effects of catastrophic global warming, had just been secured.
The announcement was the culmination of more than 20 years of fraught UN climate talks. The Paris Agreement, as it came to be known, was lauded across the world’s media and broadly welcomed as a historic first step towards a decarbonised economy.
Jennifer Morgan of the Washington-based World Resources Institute said the long-term goal was “transformational” and sent signals to the heart of global financial markets.
The long-term investment implications were huge, as was a dawning realisation that the risks of holding fossil fuels within investment portfolios needed to be urgently addressed. A change was afoot. There was work to be done.
That was five years ago and the acceleration in the implementation of objectives by national and regional governments has caused significant disruption across the finance industry.
HSBC industry leader
One of the first to align its financing portfolio to the Paris Agreement goals, HSBC has emerged as an industry leader in sustainable finance. In their recognition of the potential impact of climate change, the bank is committed to accelerating the transition to a thriving low-carbon global economy through finance. Sustainable finance is now, more than ever, at the heart of their business agenda.
“We recognise the maturing of the Paris Agreement and that the entire economy needs to be net-zero by mid-century”, says Marine de Bazelaire, Head of Sustainability, HSBC Europe. “It’s the commitment of HSBC to be net-zero by 2030 for its own operations (including supply chain) and align its financed emissions to net zero by 2050.”
Undoubtedly, HSBC bank certainly has both the scale and global reach to play such a leading role. But that’s not to minimise what a mammoth task is ahead.
“It is imperative for the sake of the social, economic and natural state of our entire world economy to achieve net zero,” says Bazelaire. “It means an entire change of mindset and we need to have conversations with our clients to support the transition to a more sustainable and resilient economy.”
Notably, sustainable practices are also demanded by HSBC’s clients. In HSBC’s Global Navigator Report 2020, in which the bank surveyed more than 9,000 business decision-makers across the world, almost two-thirds of companies believe they have a role to play in delivering the UN’s Sustainable Development Goals (SDG) – with one-quarter of businesses noting they have a significant role to play.
Firms today feel they can make a direct contribution to improving health and wellbeing, industry innovation and infrastructure, decent work and economic growth, and affordable and clean energy, the results showed. Businesses are increasingly looking at environmental, social and governance (ESG) metrics when shaping business strategies, and regulatory standards are helping to improve operational efficiency and grow sales.
“It's an imperative and also a direct opportunity,” says Bazelaire. “There is an environmental benefit for clients and it makes good commercial sense. We will support the long term future and the prosperity of our clients through a series of initiatives and investments, both commercial and financial.”
And it’s here, through their scale, expertise and capabilities, that HSBC has stepped to the fore.
One example being the HSBC Global Asset Management and Pollination, a climate change advisory and investment division that has entered a joint venture to create the world’s largest natural capital manager. The partnership will invest in projects that preserve, protect and enhance nature over the long-term and look to raise US$1 billion followed by a carbon credit fund at up to US$2 billion.
Other measures include providing tailored advice, expertise and financing ideas to clients through a dedicated ESG Solutions Unit, which launched in July 2020. There is the Centre of Sustainable Finance, which has been created to provide sustainability-related thought leadership and innovation within HSBC and across the financial sector.
Naturally, the bank has won widespread recognition for these efforts. HSBC was named Investment Bank of the Year for Sustainability by The Banker magazine in September 2020 and World’s Best Bank for Sustainable Finance by Euromoney magazine for two consecutive years.
Change begins from within
As always, change begins from within. HSBC has partnered with Earthwatch for more than a decade and in 2009 launched the global Sustainability Leadership Programme (SLP), designed to promote understanding and leadership of sustainability as a core business issue and opportunity.
Grégoire Comte, Senior Cash Management Sales, at HSBC in Luxembourg, is one of the 1,500 global senior leaders who have been selected to join the programme in light of his potential to become an ambassador of ESG in the market and a future game-changer.
HSBC Luxembourg has invested in developing 25 ESG Ambassadors by putting them through an initial online training shaped by the Cambridge Institute for Sustainability Leadership, followed by a two-and a half day experiential-based training in conjunction with Earthwatch. Each ESG ambassador will then specialise in a specific topic, gather the latest research and share back to the ambassador community monthly to ensure constant learning and development on this ever evolving topic.
The programme offered “great personal training,” says Comte, and “helped me to achieve objectives I was not able to alone.”
“I’m proud HSBC has made a commitment to sustainable finance and it’s not just words on the website,” says Comte. “It is a real commitment. There's a date. We’ve made the first step. Enough talk, more action. This is why I’m proud HSBC is leading change in sustainable finance”
Naturally, achieving the ambitious Paris Agreement goals will require even more effort and pace to ensure environmentally and socially responsible growth. It’s not something HSBC can achieve alone in a silo.
Still, as the bank’s belief in the commitment to sustainable finance is embedded in the entirety of the organisation and HSBC continues to lead active change in the sector, other institutions may be inspired to follow their strategy of less talk, more action.