HSBC sets CO2 limits for capital markets

Green support: An HSBC signage at the bank’s branch in Hong Kong. HSBC’s so-called facilitated emissions targets will include debt and equity capital markets as well as syndicated loans. — Bloomberg

LONDON: HSBC Holdings Plc has become one of the first global banks to set targets for limiting the carbon footprint of its capital markets business.

The bank’s so-called facilitated emissions targets will apply to its underwriting of deals for the oil and gas, as well as power and utilities sectors, according to its annual report published on Wednesday.

The calculation is new, and follows a recent industrywide agreement to disclose the emissions associated with banks’ capital markets operations.

HSBC said it will include debt and equity capital markets as well as syndicated loans in the disclosure.

“We recognise that data, methodologies and standards for measuring emissions and for target setting will continue to evolve,” the London-based bank said on Wednesday in connection with the publication of its annual results.

Disclosure guidelines around facilitated emissions were introduced by the Partnership for Carbon Accounting Financials (PCAF) at the end of 2023.

The PCAF accord asks banks to disclose 33% of greenhouse gas emissions associated with bond and equity underwriting.

That’s in line with a proposal put forward by an eight-member working group chaired by Barclays Plc and Morgan Stanley, and of which HSBC was also a member.

Barclays has included capital markets along with lending in its climate targets using its own methodology since 2020.

Ulf Erlandsson, founder and chief executive of the Anthropocene Fixed Income Institute, called HSBC’s move a “nice step forward,” in a post on LinkedIn.

“It is good to see banks now setting up targets on facilitated emissions.”

Though banks have long been expected to publish the carbon footprint associated with their loans books, known as financed emissions, coming up with estimates for facilitated emissions has remained a divisive subject.

That’s because corporate bond sales rarely remain on a bank’s balance sheet once they’re issued.

“As we are at the beginning of our journey to track and measure progress, we believe it would be premature to infer future trends from the 2019 to 2022 progress at this stage,”

Jeanne Martin, head of banking programme at London-based climate non-profit ShareAction, said a 100% target – instead of the 33% agreed by PCAF – would be better for the environment.

“This is a missed opportunity for the bank to show it is serious about its green credentials and meeting its own net-zero goal,” Martin said in a statement.

“The bank needs to set ambitious targets and stick to them to prevent catastrophic global warming that puts people and planet at risk.” — Bloomberg