As the world strives to meet its climate and nature goals, including the Paris Agreement target to limit the increase in global average temperature to 1.5 °C above pre-industrial levels, the financial community has a major role to play. The industrial landscape of the world needs to fundamentally change. Capital and financing deployed by financial institutions, including banks, can have an enormous impact on businesses, influencing their direction of travel towards net zero greenhouse gas emissions by 2050 or sooner.
HSBC is one of a number of banks committed to this net zero transition and Emanuele Vignoli, CEO of HSBC Luxembourg says that the bank has made this ambition its “north star”.
Helping clients transition to more sustainable investment and production is critical, says the CEO – this is both a challenge and a real opportunity. “To move towards a more sustainable world, banks need to support companies to change their models rapidly and at scale, providing them with the right level of financing and know-how” says Vignoli.
“At HSBC we aim beyond simply greening our balance sheet, to supporting our customers to decarbonise and reduce real world emissions, he continues. “Our global scale and connectivity means we are at the heart of the transition in the sectors and geographies where the most change is needed – this is where we can have the largest impact.”
Financing change
One approach financial institutions could take would be to simply walk away from heavily emitting sectors, however although this would reduce emissions on a bank’s balance sheet, it would have little or no effect on real world carbon emissions, argues Vignoli. Instead, banks should use their unique position to fully engage with customers on the topic, ensuring they have a strong transition plan in place and providing them with the financing they need to phase out fossil fuels while rapidly scaling up the clean energy supply. This is the approach taken by HSBC, which has recruited new talent to maximise its sustainability capabilities. “This means recruiting experts in this field, including leading global experts on the science, as well as providing ESG training for our employees.”
We really work with businesses from the outset to understand their sustainability and transition plans.
HSBC’s decision to continue financing companies in high emissions sectors requires the bank to help businesses invest in new technologies and to develop more sustainable models. ‘We really work with businesses from the outset to understand what their sustainability and transitions plans are,’ Vignoli explains. “Our large corporate business in Luxembourg in particular allows us to work closely with clients on their transition plans.”
In its 2022 annual report HSBC reported that since January 2020 it had provided and facilitated a global cumulative total of some $201.7 billion in sustainable finance and investment, which it aims to increase to $750 billion to $1 trillion by 2030.
An industry-wide shift
HSBC’s ambitions to help finance the new economy also involves working in partnership with public and private sector players to accelerate innovation and get money to where it is needed most. It also includes supporting common standards across the industry, ensuring that targets and policies are credible, durable and transparent. The bank is one of the founding members of the Glasgow Financial Alliance for Net Zero.
In addition to its overarching focus on effecting positive change through its financing and investment activities, the bank has committed to be net zero in its own operations and supply chain by 2030. In Luxembourg, for example, this has included changes such as HSBC moving into a more sustainable, carbon-neutral building as well as introduce a car lease plan that only allows employees to purchase hybrid or a fully electric vehicle.
“In Luxembourg, one of our main priorities is to make sustainable finance part of our business as usual,” Vignoli concludes. “That includes our client on boarding, and across our main businesses in the country; corporate banking, asset management, global private banking and securities services, as well as engaging with key industry players including the ABBL board regulators and the ministry of finance.”