HSBC is the world’s fifth largest bank and active in retail, commercial and private banking as well as providing financial services to governments and multinationals. As one of the few financial institutions presented in this report, HSBC has committed to all major voluntary undertakings of the financial industry, namely the UN Global Compact, the UN Principles for Responsible Investment, the UN Principles for Sustainable Insurance and the Carbon Disclosure Project.
HSBC claims to take into account a variety of ESG issues and to engage with customers on these. HSBC notes it will even “end banking relationships with customers when they are unwilling or unable to comply with our standards”. While the bank was very active in advancing its sustainability policies in 2013 and 2014, there has been no further progress reported in 2015.
Climate Change: In the run-up to the Paris Climate Conference 2015 (COP21), HSBC has joined around 80 companies declaring that “the private sector has a responsibility to engage actively in global efforts to reduce greenhouse gas emissions, and to help the world move to a low-carbon, climate-resilient economy”. Yet, all commitments that have been made by HSBC merely refer to increasing the financing of renewable energies and sustainable solutions, whereas divestment from fossil fuel companies does not seem to be on the table. Besides being among the world’s Top 20 financiers of coal, this report found that HSBC has assisted ExxonMobil and Total, two of the world’s major carbon emitters, in acquiring fresh capital through the underwriting of bonds amounting to a total of €3.5 billion (combined) since 2013. In light of this, HSBC’s pledge to commit $1 billion to a green bond portfolio or the amount of €4.9 billion it has been giving to finance renewable energy companies between 2009 and 2014pales in comparison.HSBC finances Alstom (€931 million in loans) and the mining companies AngloAmerican (€179 million in loans and €420 million in bond underwritings) and Grupo Mexico (€211 million in bond underwritings). AngloAmerican and Grupo Mexico on the other hand are involved in human and labour rights abuses as well as environmentally polluting mining practices.
As already criticized in the Dirty Profits 3 Report, HSBC’s sector policies are insufficient to address some of the most pressing environmental and social issues commonly associated with these sectors, as no clear assessment and monitoring criteria are defined. In its 2011 energy sector policy which also covers oil and gas exploration and power generation, no limitations are set out regarding environmental and human rights issues other than defining weak limitations for coal-fired power plants, nuclear power plants and activities regarding oil sands. Also the mining and metals policy fails to define concrete assessment criteria, only declaring that “HSBC has a restricted appetite for supporting individual operating sites where .. tailings storage facilities and waste rock dumps represent a material threat to human life or groundwater”. This “restricted appetite” however only applies to specific mining projects, thus leaving room for general corporate credits that could ultimately be channelled to the very same projects.
Defence: HSBC continues to stay active, underwriting bonds for Airbus (€225 million) and Rolls-Royce (€298 million), despite its 2010 commitment to “withdraw progressively from the financing of the manufacture and sale of weapons”. The Defence Sector policy exempts financial services for customers who are primarily active in the production and sale of arms, however it does not prohibit financial services for conglomerates that undertake a “mix of weapons, weapon-related or other business” . In reality this would apply to half of the TOP 100 arms producers, as their military share of sales is 50% or less. Indeed, Airbus is the 7th largest arms company by sales, among others contributing to the production of nuclear weapons, the development of unmanned aerial systems and is a shareholder of MBDA, the world leader in missile systems with a military share of sales of 100% . Yet, Airbus’ defence sales only amount to 18% of its total sales, thus clearly falling under HSBC’s threshold of “one third of turnover”. The same applies to Rolls-Royce, the 16th largest weapons-producer worldwide, manufacturing engines for military and marine defence which make up 23% of their total sales. What is more, the policy only applies to financial services and does not cover the management of shares or bonds. Thus, HSBC holds shares of the biggest arms producer Lockheed Martin and the highly controversial German defence company Rheinmetall worth €29 million and €16 million respectively. This engagement by HSBC with some of the major arms producers worldwide clearly demonstrates the weaknesses of its defence policy and emphasizes the need for further improvements, especially in the context of fast-moving technological progress in military services with the development of unmanned aerial and surveillance systems.
The above policy analysis is extracted from the Dirty Profits 4 report published in February 2016.
HSBC was once again included in the Dirty Profits 4 report, details of the financial ties to selected controversial companies can be found within the report and detailed data tables from the research period 2013-2015 can be downloaded here.
For more information on the financial ties between HSBC and the selected controversial companies please see the Dirty Profits 3 report. Further detailed data tables are available to download here.