HSBC defends hydrocarbon investment

Despite positioning itself as a "green" bank, HSBC yesterday confirmed it will continue to invest in carbon intensive industries for the foreseeable future, arguing that it can be a "force for good" within those sectors.

Asked at a BT Global Services conference on green banking if HSBC would invest in the next generation of coal-fired power stations the government is currently considering, HSBC's head of group sustainable development Jon Williams said that the company would continue to fund hydrocarbons, including investment in the coal, oil and gas industries.

However, he added that the policy remained consistent with HSBC's branding as a market leader in green banking, arguing that the company follows strict environmental and sustainability standards from the International Finance Corporation (IFC) before investing in any carbon-intensive industries.

"We would fund coal, oil and gas," he admitted. "But we would also look at the environmental impact of any project, we would make sure they use the latest and cleanest technology and we would assess how any fossil fuel investment fits into a national programme of carbon reduction."

The policy is likely to attract the ire of some environmentalists who argue that despite the efforts of banks such as HSBC to limit their environmental impact, they could help deliver far greater cuts in carbon emissions by refusing to fund carbon intensive industries.

But Williams maintained that such an approach would prove counter-productive and banks could help polluting industries improve standards by continuing to engage with them and demanding improved environmental performance.

"If we are to get developing countries into a post-Kyoto agreement, we have to accept that they are going to continue to try and grow their wealth and population and they will burn coal as a result," he explained. "Our job has to be to help them moderate those carbon emissions and we can do that by saying 'burn coal, but I will only finance clean coal, and the latest technologies and projects that are carbon capture ready'. You can’t walk away from hydrocarbons for the next 10 years, otherwise you lose the ability to engage with the energy sector, particularly in the developing world."

Williams accepted there was a reputational risk in this approach, citing the example of a spoof ad campaign from an environmental group highlighting the bank's investment in forestry projects. But he insisted that such brand damage could be managed by engaging with critics and fully explaining the bank's sustainable investment policy and its support for environmental standards.

"We only support sustainable certified timber and are engaging with clients to help them transfer to more sustainable models," he said. "Ultimately our investment decisions are in the hands of our stakeholders and when we ask if we should pull out of such investments they say we should stay because overall we are a force for good."