Apr 242015
 
By Yann Louvel and Greig Aitken, BankTrack, 24 April 2015

Today’s HSBC annual shareholders’ meeting in London has been dominated by the bank’s cutely timed announcement that it is considering whether or not to move its headquarters out of the UK. Here at BankTrack, and in light of other less high profile HSBC announcements of late, we’ve been wondering when the bank might see fit to announce an imminent departure from its substantial global coal finance investments – by our conservative estimates, HSBC provided just short of €8bn support to the coal sector in lending and underwriting over the period 2005-April 2014.

Banktrack_revised3

A frisson of fossil fuel fever arrived just this week via a Newsweek article entitled ‘HSBC Warns Clients of Fossil Fuel Investment Risks’ that reports what would appear to be a fairly uncompromising view now forming in some minds within the bank.

Citing a new private HSBC investment analysis, Newsweek describes how fossil fuel companies may become, according to HSBC analysts, “economically non-viable” in view of the emerging reality of stranded fossil fuel assets. Three options are laid out for investors: “divesting completely from fossil fuels; shedding the highest risk investments such as coal and oil; or staying the course and engaging with fossil fuel companies as an investor.”

In January this year, a Goldman Sachs investor note generated a lot of buzz with talk of coal having reached “retirement age”, and HSBC investment analysis has some recent form on pointing out the risks of stranded assets in the fossil fuels sector. This new analysis, though, marks a much more hard-nosed and deeper warning about the precarious state of coal investments in particular.

Whether, of course, HSBC’s investment analysts and its fossil fuel bankers sit on the same continent, let alone in the same building, remains the worry. Though it now currently occupies number 17 spot in BankTrack’s Top 20 Coal Bank rankings, according to our research HSBC’s coal financing has remained solid over the last five years:

  • 2010                       €805.5m
  • 2011                       €1,204.5m
  • 2012                       €794.9m
  • 2013                       €1,068.8m
  • 2014 (to April)      €1,065.4m

Notably, however, anyone casting a quick eye over the reports and documents released to coincide with today’s HSBC AGM will find no acknowledgement of the bank’s involvement in coal financing. Which brings us to another recent ‘coal bank compromised’ moment.

With the crucial Paris climate summit now only eight months away, we’re now seeing growing signs of major corporations grasping for a piece of the feel-good climate action. Among the signatories to an April 17 open letter from global CEOs to world leaders ‘urging concrete climate action’ are two banks: HSBC and Dutch bank ING.

Catching our eye in this aspirational text from the ‘coalition’ of 43 ‘CEO climate leaders’ were the following comments:

a) “We welcome transparency and disclosure regarding financial investments and policies in relation to all energy-related activities — including fossil-based and alternative.”

b) “Hastening the shift to a low-carbon economy in an economically sustainable manner will generate growth and jobs in both the developing and developed world. Delaying action is not an option — it will be costly and will damage growth prospects in the years to come.”

It remains to be seen which other banks will opt to join this coalition. One question for them might be how much will they want to disclose about their fossil fuel interests? As mentioned already, HSBC – like so many other major banks – is notably shy about disclosing its fossil fuel financing, preferring to focus exclusively in annual and other reports on any clean energy investments it possibly can.

ING, however, to give it its due has been a lot more forthcoming about its overall energy investments mix, no doubt a reflection of its efforts to reduce, among other things, its project finance volumes for coal from 21% in 2009 to 13% in 2014 (note, the graph below, from ING’s annual report for 2014 does not include its general corporate finance figures – and ING is still ranked number 28 coal bank out of 92 by BankTrack).

ING coal reporting

Excerpt from ING Annual Report 2014 (page 40)

Transparency and disclosure about past – and ongoing – climate sins is one thing. Delaying action is quite another and, as the letter states, “is not an option”. Therefore, is it bold of us to ask: where are the declarations, at least from HSBC and ING, that they are pulling out of the most climate-damaging fossil fuel, namely coal?

Bank talk and analysis on climate change and stranded assets is encouraging and positive in and of itself. It can only be viewed sceptically, however, when there is no (to quote that letter again) “concrete action” forthcoming from those that are demanding, well, “concrete climate action” from others.

As the global divestment dynamic continues to hot up, and as the Paris summit attracts more banking hangers-on, we will surely be encountering more encouraging talk. But action speaks louder than words, and patience with the banking sector is wearing ever thinner – not least on climate action.

 

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