Investors have forced major multinational bank HSBC to provide greater transparency on its financing of projects for oil and gas companies moving forward, reports suggest.
According to a report from the Financial Times, the company, which has a £116bn market cap, will start disclosing off-balance sheet emissions in its annual reports from this month, including those linked to capital raises for fossil fuel firms.
The FT reports that it is normal practice for banks to include some metrics of its lending clients’ emissions in their own carbon footprint but do not include emissions linked to other aspects of business with fossil fuel companies in areas such as arranging share or bond issuance.
In this area, HSBC has a colourful recent history, with billions of dollars in funding arranged for some of the world’s largest petrogiants including a $5bn facility for TransCanada Pipelines in December and a $4.7bn loan some weeks later for Occidental Petroleum.
Céline Herweijer, HSBC’s group chief sustainability officer, and a member of the bank’s executive committee, told the Financial Times that the way the bank accounts for emissions differs because it is further removed from the capital market aspects than direct lending.
“This stuff sometimes is hours or days or weeks on our books,” Herweijer said.
“In the same way that the corporate lawyer is involved in that transaction, or one of the big four accounting firms is involved . . . they’re facilitating the transaction. This is not actually our financing.”
It was “always the intention” for HSBC’s climate targets to eventually include facilitated emission disclosures, she added.
In response to a report by the Investigative Bureau of Journalism last month that uncovered the full extent of HSBC’s fossil fuel lending, the bank said:
“HSBC’s approach is to engage with our major oil and gas clients on their targets and transition plans, and to align our oil and gas financing portfolio to a 2030 net zero aligned financed emissions target.”
In December, the Partnership for Carbon Accounting Financials (PCAF), a voluntary group joined by dozens of financial institutions including Morgan Stanley and Barclays, launched a new methodology for banks which dictated that firms will need to account for a third of emissions linked to capital market deals.
Last Friday, Barclays announced it would no longer directly financing energy clients’ new oil and gas projects as part of updates to its climate change strategy.
However, this does not include the firm’s corporate level financing, which makes up most of the bank’s lending to energy clients, who can then chose to use it to fund new projects themselves.
HSBC has been approached for comment.