Sustainability Blog

HSBC to Cut Loans to Carbon-intensive Sectors

By Simon Johns - Feb 23, 2022

HSBC Holdings plc will cut loans to carbon-intensive sectors in line with the Paris Agreement’s target to limit the global temperature rise to 1.5 degrees Celsius and for itself become a net zero bank by 2050, it said in a press statement this week.

The London-headquartered bank’s financed emissions for oil and gas are about 35.8 million tons of carbon dioxide equivalent. The intensity of its financed emissions from loans to power and utilities is 550,000 tons of CO2e per terawatt hour. HSBC aims to reduce financed emissions from oil and gas by 34% and power and utilities by 75% by 2030.

The bank’s announcement included a pledge to disclose targets for other sectors, including mining, aluminum, cement, iron and steel, and transport.

A financial institution can account for greenhouse gas emissions from its investment and lending activities as part of its own carbon footprint under Greenhouse Gas Protocol Scope 3 Category 15, known as financed emissions. HSBC’s calculations also include Scope 1 and 2 emissions 

Read more about the Greenhouse Gas Protocol here.

Environmental campaigners have rebuked HSBC, saying that the bank’s approach has a large loophole. The commitment does not apply to bond underwriting and omits loans to carbon-intensive sectors further downstream, which would include lubricant and base oil producers. Critics also argue that these companies could avoid plans to reduce emissions while still receiving financing from the bank. 

Adam McGibbon, the United Kingdom campaign leader of Market Forces, an environmental group focused on financial institutions, dismissed HSBC’s commitment as “finding a new and innovative way to fudge their emission reduction targets.”

In the four months prior to HSBC’s net zero announcement in 2020, the bank financed a number of fossil fuel companies involved in coal, tar sands, oil and gas extraction and hydrocarbons infrastructure. This “cast serious doubt over the credibility of HSBC’s climate commitments, given that phasing out financing of fossil fuels is an absolute must for any net-zero strategy,” said ShareAction, a London-based responsible investment non-profit organization.

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