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HSBC will start disclosing off-balance sheet emissions in its annual report later this month, after investors pressured the bank to stop leaving out swaths of data from its climate calculations.
The change means the UK’s largest bank will now include emissions linked to capital raises on which it advises fossil fuel companies, an area which investors have until now seen as a climate blind-spot for banks.
Banks usually include a portion of their clients’ emissions in their carbon footprint, based on their lending to the company. But that calculation tends to only include lending, not emissions linked to capital markets transactions where a bank helps its clients to raise funding by arranging share or bond issues, for example.
Banks “have a habit of wiping their actions and impacts under the carpet,” said one asset manager who has raised the disclosure issue with HSBC. “When we discuss carbon emissions linked to finance we have a habit of avoiding facilitated emissions, which is troubling.”
Although HSBC scores relatively highly for the proportion of green deals it facilitates relative to fossil fuel ones, according to an analysis by the Anthropocene Fixed Income Institute, it has kept up ties to companies which pump, move and sell fuels from new oil and gasfields despite a commitment to stop financing them directly.
Last year, HSBC worked on a $3bn raise for Greensaif Pipelines Bidco, which has a 49 per cent stake in Saudi Aramco’s gas pipelines, and was among the banks that arranged a $3.3bn revolving credit facility to Italy’s Eni, which is also expanding its oil and gas production. The bank declined to comment on these relationships, but said it was seeking to “avoid an overnight exit from banking oil and gas producers”.
The difference in how the bank accounts for emissions is down to the more hands-off role banks play in capital markets compared to lending, Céline Herweijer, HSBC’s group chief sustainability officer, and a member of the bank’s executive committee, told the Financial Times.
“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.
Other banks including NatWest and JPMorgan already publish their so-called facilitated emissions. But only a handful including Barclays and Wells Fargo include lending and capital markets activities in their target for cutting their carbon footprints from the oil and gas sector on an absolute basis as HSBC is expected to do.
HSBC published facilitated emissions as a one-off in 2022 after an activist campaign, which showed its capital markets activity for oil and gas clients was linked to carbon and equivalent gas emissions of 29.5mn tonnes in 2019, compared with 35.8mn tonnes for lending.
Only a relatively small proportion of facilitated emissions from the oil and gas sector is likely to end up on HSBC’s books. The bank has said it will back an accounting technique agreed on by an industry standard-setting group led by Barclays and Morgan Stanley, which agreed in December that banks could choose to take responsibility for all or just a third of emissions linked to capital market deals.
Campaigners including ShareAction say this falls short of acknowledging the crucial facilitating role banks play in the energy transition. HSBC takes full credit for deals in counting progress towards its target of providing up to $1trn in clean energy and other green deals by the end of the decade.