HSBC is scaling down its financing of ‘dirty’ energy as it refreshes its energy policy.
Under the changes, the bank will no longer fund new coal-fired power plants, greenfield oil sands projects or offshore oil or gas extraction in the Arctic, with some exceptions. It will also prohibit the financing of new large dams for hydro-electric projects which do not align with the World Commission on Dams Framework, as well as new nuclear projects inconsistent with the International Atomic Energy Agency standards.
HSBC says it will phase out lending for the development of new coal-fired power projects in high-income countries by December 31, 2019. The financing withdrawal will apply globally, exempting Bangladesh, Indonesia and Vietnam. The bank says its “targeted time-limited exception” of these nations “balances local humanitarian needs with the need to transition to a low-carbon economy”.
The bank says it anticipates that its attributed commitments to oil sands will reduce over time, but does not specify by when. Oil sands, sometimes called tar sands, are a mixture of sand, water and bitumen. The oil is too thick to flow freely, so is extracted through crushing and heating with hot water, which are energy-intensive processes.
HSBC’s move follows similar announcements from other financial institutions last year, including National Australia Bank, Deutsche Bank, ING, BNP Paribas, Natixis and Axa.
Daniel Klier, group head of strategy and global head of sustainable finance at HSBC, says: “Our updated energy policy reflects HSBC’s ambition to help our customers make the transition to a low-carbon economy in a responsible and sustainable way.”
“We recognise the need to reduce emissions rapidly to achieve the target set in the 2015 Paris Agreement […] and our responsibility to support the communities in which we operate,” he adds.
The bank’s new energy policy comes on the back of much media attention about controversial oil sands projects such as the Keystone XL pipeline and the Line 3 Pipeline Replacement Project (L3RP), both in Canada. Keystone XL is a proposed pipe extension to transport partly-processed oil from Alberta, Canada to refineries in Texas. L3RP aims to do the same, except it will transfer the crude oil to Wisconsin. Though each project has national approval, some environmental groups raise concerns: Greenpeace alleges the Keystone initiative alone could add 175 million tonnes of CO2 into the atmosphere per year.
Commenting on the HSBC announcement, John Sauven, executive director of Greenpeace UK, says: “This latest vote of no-confidence from a major financial institution shows that tar sands are becoming an increasingly toxic business proposition.
“It makes no sense to expand production of one of the most polluting fossil fuels if we are serious about dealing with climate change in a post-Paris world.”
Greenpeace calls on Barclays to “decide if it wants to be the only UK bank offering project finance to tar sands pipelines”.
A Greenpeace report entitled In the pipeline: risks for funders of tar sands pipelines also takes aim at JP Morgan, Royal Bank of Canada, TD Bank Group and Wells Fargo for not following suit in the divestment.