London-based financial institution HSBC will instantly cease lending and underwriting for brand spanking new oil and gasoline drilling tasks, the financial institution introduced Dec. 14, making it the primary massive multinational financial institution—and top-tier funder of fossil fuels—to undertake such a coverage.
The coverage change follows a 12 months of stress from activist shareholders, and raises the bar for different main banks which have set long-term targets to decarbonize their lending however have to this point been reluctant to shut the purse strings for oil and gasoline producers.
“HSBC’s announcement is groundbreaking and can ship shockwaves to governments and fossil gas giants,” mentioned Jeanne Martin, head of the banking program at ShareAction, an advocacy group that spearheaded climate-related shareholder resolutions at HSBC and labored with the financial institution on its new oil and gasoline coverage.
HSBC will proceed lending to fossil gas corporations
To be clear, the coverage solely impacts project-specific finance, the place an oil and gasoline firm seeks a mortgage for a selected new drilling challenge or infrastructure to assist it. HSBC will proceed to lend and supply monetary companies to grease and gasoline corporations, together with these with plans to broaden drilling, on the normal company stage, i.e., finance not designated for one specific challenge. On common throughout European banks, 92% of finance for oil and gasoline corporations got here on the company stage, with solely 8% for particular tasks, based on ShareAction. HSBC is the highest European financier of oil and gasoline corporations, offering $59 billion in lending, underwriting, and different financing from 2016 to 2021.
Nonetheless, slicing off challenge finance “sends a transparent sign to its purchasers that the financial institution is dropping its urge for food for this type of exercise,” Martin mentioned. And it might be a stepping stone to extra wide-reaching restrictions; all main European banks now have some restrictions on corporate-level financing for coal corporations, a broad shift that additionally began with project-level finance.
HSBC can nonetheless clear up its promoting
There’s nonetheless loads HSBC can do to enhance on its local weather insurance policies, Martin mentioned. In October, UK officers banned a number of the financial institution’s adverts for making claims that have been deceptive or greenwashing. And though HSBC has mentioned it can require its company purchasers to ship net-zero transition plans, it hasn’t mentioned the way it will assess these plans or whether or not it could sever ties with purchasers whose plans are insufficient.
Nonetheless, if HSBC can not less than goal challenge finance, there’s no cause why JP Morgan Chase, Financial institution of America, Citi, and different main fossil gas financiers can’t comply with swimsuit. And the dearer and elusive finance for drilling turns into, the extra stress oil and gasoline corporations will really feel to hurry up their shift to lower-carbon enterprise fashions.
“The truth that HSBC might make this dedication makes it very exhausting for different banks to not make comparable commitments,” Martin mentioned.
