HSBC and fossil fuel finance Why the UK’s biggest bank needs to pull out of coal October 2013 HSBC is one of the biggest banks in the world. It likes to project an image as the world’s ‘local bank’ and highlight its commitment to responsibility. But behind the slogans, there is a very different reality. HSBC’s investment banking arm is the UK’s biggest underwriter of fossil fuel bonds
and shares. It has lent billions of pounds to some of the world’s biggest fossil fuel companies. This briefing gives a short summary of why HSBC needs to stop bankrolling coal, and end its involvement in the fossil fuel sector as a whole.
There are several reasons why immediate action should be taken to stop banks like HSBC supporting these companies:
HSBC is the biggest bank in the UK and one of the biggest in the world. It is valued at over £120 billion and has assets worth over £1.6 trillion1 . It has great power and influence within the financial sector as a whole. Despite all its marketing slogans about sustainability and its sponsorship of various climate change projects, HSBC is doing little to move away from investment in fossil fuels. At the moment, HSBC remains the biggest single UK supporter of the fossil fuel industry through its investment banking arm. Between 2010 and 2012, HSBC helped fossil fuel companies raise just under £75 billion. This is almost double the figures mustered by rival banks, Barclays and RBS2. This figure does not include lending to companies such as BP, which received loans worth over £3 billion from a group of banks including HSBC in 20103.
Why coal? While most of HSBC’s fossil fuel finance is given to the oil and gas sector, the bank is also involved in facilitating the coal mining industry through its support for global mining giants like Anglo American, Xstrata and BHP Billiton.
•• Climate change. The carbon emissions of coal are higher than for any other fuel in the world. Recent estimates show that the vast majority of the world’s coal reserves will have to be left in the ground in order to avoid devastating climate change. •• Destroying lives in the global south. Coal mining is responsible for devastating local pollution in the global south as well as the displacement of thousands of people from their homes. People, including in Indonesia, are increasingly calling for an end to the destructive effects of coal mining4. •• Carbon bubble. Banks and other financial players have created a carbon bubble in the global economy. Only a small fraction of fossil fuel resources can be burned without breaking international commitments to tackle climate change. This means most fossil fuel assets are worthless. A sudden correction of the current overvaluation of fossil fuel companies could cause a new global financial crisis.
Money raised (£billion)
Money raised for fossil fuel companies through bond and share deals 2010 - 12 80 70 60 50 40 30 20 10 0
Standard Chartered Lloyds
HSBC - Not as green as it claims
Case study: Cerrejon coal mine
HSBC claims that it takes climate change seriously. The bank claims to have implemented strong criteria limiting its financing of coal. But a closer look at its Energy Sector Policy reveals that most of HSBC’s guidelines for coal apply only to the small fraction of its lending that goes directly to specific projects (project finance) and not to the financing of the companies behind the projects, which is a far bigger source of money for coal. The only guideline that applies to general corporate lending is that an ‘analysis of carbon intensity’ must take place if the company has over 3000MW of coal capacity in its portfolio.
The Cerrejon coal mine in Colombia is one of the biggest and most destructive coal mines in the world. It has led to the eviction of whole villages from their land and threatened the Rancheria River, the only reliable water supply in the La Guajira region. HSBC provides financial support to the three multinational companies involved in the project (BHP Billiton, Anglo American and Xstrata). For example, BHP Billiton has raised £1.863 billion in bond issues underwritten by HSBC since 20096. HSBC has also contributed £107 million and £262 million respectively to syndicated loans for Anglo American and Xstrata over the same period.7
HSBC’s policy also covers power plants only, meaning that there are no limits on HSBC’s lending to coal mining companies like BHP Billiton and Anglo American. Overall, HSBC’s Energy Sector Policy does little to limit the bank’s investment in coal. HSBC previously claimed to be the ‘world’s first carbon neutral bank’, but has since said that it is no longer carbon neutral because carbon markets didn’t work in the way it anticipated. HSBC’s definition of what constitutes its own carbon emissions is very narrow. It includes only its direct carbon emissions and the carbon emissions which come from the electricity it purchases. HSBC does not consider any carbon emissions which come from bankrolling fossil fuel firms to form part of its carbon footprint5. As a result HSBC’s previous supposed carbon neutrality only referred to its annual spend of £10 million a year on carbon offset schemes and other projects, like improving the efficiency of light bulbs used in bank branches. £10 million is less than 0.0007 per cent of HSBC’s overall assets. The billions of pounds that HSBC helps fossil fuel companies raise in loans, bond and share issues every year are excluded from its carbon neutral calculation.
What needs to be done HSBC must pull out of coal and take steps towards eliminating its involvement in the oil and gas industry. This means an end to financing big players in the coal industry, like BHP Billiton and Anglo American. It is time for the government to take action to put an end to banks bankrolling companies engaged in damaging fossil fuel projects in the global south. Carbon trading schemes and voluntary codes of conduct are failing. If the UK government is serious about tackling climate change, it must regulate the UK banking system to move it away from its dependency on carbon intensive industry.
Contact For more information on this issue, please contact Miriam Ross, media officer, (+44) (0)7711 875 345, miriam.ross@ wdm.org.uk
1 As of the end of 2012. See: http://www.hsbc.com/~/media/HSBC-com/InvestorRelationsAssets/annual-results/pdfs/hsbc2012arn. ashx 2 WDM research sourced from commercial databases. 3 ibid. 4 For more information on this, see WDM’s recent report, Banking while Borneo burns: How the UK financial sector is bankrolling Indonesia’s fossil fuel boom: http://www.wdm.org.uk/exposed-how-our-banks-finance-climate-change 5 Based on declared costs over five years of $90 million in HSBC and Carbon Neutrality report 2008 available here: http://www. banktrack.org/manage/ems_files/download/carbon_neutrality_plan/080206_hsbc_and_carbon_neutrality_feb_2008.pdf 6 WDM research conducted by Profundo using commercial databases. 7 ibid.
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