Banks and Fossil Fuel Divestment in 2023
HSBC announced divestment from oilfield projects that were approved after 2021. In 2022 Deutsche Bank’s head office was raided by federal investigators, and a high-level executive was sacked. Is HSBC’s announcement yet another case of greenwashing or is it an indicator of a new way forward for the banking industry?
By Grant Brown, Founder, Happy Eco News
Toward the end of 2022, I read some news that largely escaped the mainstream press. Maybe you read about it, but most news outlets, it seems, didn’t pick up on the significance.
HSBC, one of the largest banks in the world, made a public pledge to stop financing oil and cad fields. In the statement made on December 14, 2022, HSBC said it would not support oil and gas projects that received final approval after the end of 2021 and that it will expect more information from energy clients about their plans to cut carbon emissions.
This is HUGE news.
HSBC is one of the world’s largest funders of oilfield projects and is by no means a philanthropic entity. They are in it for money, and while it is a friendly, good, climate-positive story to sell to the public, that is not why a $10.8 trillion dollar bank divests from oil and gas.
It’s about risk. It’s about the decline of the fossil fuel industry and avoiding stranded assets in it. Sure, the oil industry has made record profits during the Ukraine crisis, and yes, these high returns are very enticing to short-term investors. Still, the big players, in this case, big lending institutions, are worried about the long-term viability of investing in an industry that is volatile and expected to decline.
The HSBC announcement follows an October 2022 admonishment by the UK Advertising Standards Authority (ASA) of complaints of greenwashing ahead of COP26 in Glasgow. The complaints focused on ads highlighting the bank’s investment of $1 trillion in climate-friendly programs such as tree-planting, yet failed to acknowledge HSBC’s contribution to increased global GHG emissions.
“Despite the initiatives highlighted in the ads, HSBC was continuing to significantly finance investments in businesses and industries that emitted notable levels of carbon dioxide and other greenhouse gasses. We did not consider consumers would know that was the case. We concluded that the ads omitted material information and were therefore misleading,” said the ASA in a public statement.
HSBC’s own annual report said the emissions it financed (those of clients and projects it provided loans and services to) are responsible for releasing more than 65 million tonnes of carbon dioxide annually. While that number only accounts for its oil and gas clients, it is undoubtedly much higher when other carbon-heavy industries are included.
To give an idea of how morally compromised the bank really was, earlier in May 2022, HSBC’s then-head of “Responsible Finance,” Stuart Kirk, gave a London presentation entitled “why investors need not worry about climate risk.” In the presentation, Kirk made light of significant global flooding risks, like the ones that devastated Bangladesh a month later, and complained about having to spend time working on something that will happen 20-30 years in the future. His presentation even included slides critical of the UN and Bank of England’s official comments about the climate crisis; “Unsubstantiated, shrill, partisan, self-serving, apocalyptic warnings are ALWAYS wrong.” Thankfully, HSBC took complaints about the presentation seriously, and Kirk was forced out in July 2022.
Interestingly, Kirk has, years past, worked for Deutsche Bank – the same bank that made big claims about sustainability and divestment from fossil fuels. The Chief Executive Officer of DWS, the wholly-owned Asset Manager of Deutsche Bank, Asoka Woehrmann, stepped down from his position in September 2022 following greenwashing allegations. These allegations resulted in a raid on DWS and Deutsche Bank headquarters. Billions of dollars in fines and public scrutiny of the bank’s practices have had a tangible negative effect on stock value, something inconceivable only a short time ago.
In turning over a new green leaf, HSBC joins other major banks in divesting from fossil fuels as part of their corporate ESG policies. With the raids on Deutsche Bank and the subsequent scrutiny, it would seem that their green policies now go beyond simple wink, wink, nudge, nudge greenwashing. There is a significant risk associated with misleading investors, especially in publicly traded companies, and it puts the banks on their back foot.
I’m not naive enough to think that the banks have found a green heart or that their executives care about anything other than higher profits and bonuses, but I do believe this signifies a turning point. Investing in fossil fuel extraction carries risks. Greenwashing carries risks. Banks are risk averse, and the combination bodes well for our planet.
