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'Tipping point?' HSBC launches green finance range for businesses

HSBC UK business customers will now have access to a suite of green finance products
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New suite of products includes a Green Loan, a Green Revolving Credit Facility and a Green Hire Purchase, Lease and Asset loan - BusinessGreen talks to sustainable finance lead Rob King to get the low-down

HSBC UK's commercial banking arm has today unveiled a flurry of new green finance products it hopes will secure it a position as the bank of choice for sustainability-conscious businesses.

The new range, which is available from today, includes a Green Loan, a Green Hire Purchase, Lease, and Asset loan, and a Green Revolving Credit Facility - the latter a first for UK industry, according to HSBC. The banking giant said all the new products are designed to help UK plc meet its environmental and sustainability goals by nudging corporates towards greener activity.

The bank has been running a pilot for green loans since November 2018 for large corporate customers, covering loans above £25m. It will now expands its offering to small and mid-size companies looking for finance for green activities, with loans starting from £300,000.

Rob King, HSBC UK's head of sustainable finance, told BusinessGreen that while the headline-grabbing sustainability efforts are coming from large corporates, their supply chain emissions targets are starting to force smaller companies to consider their environmental impact.

"It is the large corporates which are perhaps more visible to stakeholders and more keen to highlight what they are doing on sustainability, but the feedback we are getting from our smaller clients is that there is a tipping point there as well," he said. "They have a different set of stakeholders, they might be sat on the end of a supply chain with a FTSE100-listed company starting to get interested in the amount of carbon in their supply chain. So for a smaller SME supplier to that larger corporate, having a green loan might be a way of demonstrating how they're becoming more sustainable and helping that corporate meet its goals."

Moreover, access to finance right across the economy is going to prove critical to the net zero transition, as evidenced by the release yesterday of the government's new Green Finance Strategy. "The transition to a low carbon economy is going to take a huge amount of investment," said King. "It's still going to require investments from medium-sized and small enterprises, not just large corporates."

Meanwhile HSBC is also muscling in on the trend for green RCFs - lending structures that allow for the loan amount to be withdrawn, repaid, and redrawn again in any manner and any number of times, until the arrangement expires. Increasing numbers of corporates are arranging with lenders to link RCF interest rates with sustainability targets, with firms paying less in interest when they hit their goals and paying more if they miss. Companies such as Thames Water, Nokia, Louis Dreyfus Company, and Solvay are among those to have struck such deals this year.

Finally the bank's new Green Hire Purchase, Lease and Asset loan is designed to help companies looking to hire purchase or rent low carbon products such as electric vehicles. "I can see this being used to provide green leads for electric commercial vehicles for example, or electric busses," King suggested.

The launch of HSBC's new green products follows in the footsteps of other UK banks which have expanded their sustainable finance range in recent years. For example, at the end of 2017 Barclays became the first UK bank to launch a range of green finance products to help its corporate clients fund low-carbon projects and investments, including loans, deposits, asset finance, and innovation finance. Similarly, NatWest revealed last year that it had provided £3.5bn of lending to UK renewables and energy efficiency projects over a three year period.

The market is tipped for explosive growth in the coming years, as investors increasingly pivot to low carbon strategies both in light of the economic opportunity of green business, and the risks associated with high carbon investments.

The government sought to accelerate this trend yesterday with the launch of its Green Finance Strategy, which set out a range of measures designed to kickstart the flow of capital towards low carbon products. It suggested large companies and asset owners should disclose how climate change will impact their activities, while regulators will have to explicitly consider climate change in their work.

The threat of climate disclosure legislation, coupled with emerging agreement over what constitutes 'green' finance, could mean that in the future banks are even required to meet a green asset ratio, the Financial Times suggested yesterday.

Banks such HSBC, which King claims is committed to "being a leader in sustainable finance", are aiming to get ahead of the curve with ambitious green financing goals; the company has a target of facilitating $100bn of sustainable finance by 2025.

If today's launch goes well, there's scope to expand the range to include ESG loans, sustainability-linked loans, and green deposits, King said.

Responding to the launch of the government's strategy yesterday some campaigners expressed disappointment that the blueprint didn't go far enough in implementing the bold changes to the financial markets they argue is necessary in response to the climate emergency. But if HSBC's new package of products is just part of a new green wave in the finance sector, it might just be a signal that parts of the banking community at least are already getting on with driving the net zero transition.

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