HSBC to scale back oilsands financing
Europe’s biggest lender says it’s backing transition to low carbon economy
Europe’s largest bank HSBC Holdings plc will no longer finance new oilsands projects or pipelines, a move that could lead to increased borrowing costs for domestic players as European banks scale back exposure to the sector.
London-headquartered HSBC updated its policy for energy investment Friday, which now shows the lender won’t provide financial services to new, greenfield oilsands projects or pipelines dedicated to the oilsands sector. It will also no longer fund new coal-fired power plants or drilling in the Arctic.
While HSBC said it will continue to fund expansions of existing oilsands projects, environmentalists quickly likened the new policy to similar announcements by Parisbased BNP Paribas and Amsterdam-based ING Group, which said last year they would no longer participate in the sector.
“Canada is a priority growth market for HSBC — we have been here for close to 40 years and we’ve invested $200 million here in the last two years alone,” Sandra Stuart, president of HSBC Bank Canada, said in an emailed statement. “At the same time, we are committed to doing our part in supporting the transition to a low carbon economy.”
Currently, HSBC has a loan book of $6.1 billion in the Canadian energy sector.
By comparison, data from ARC Energy Research Institute shows $13.2 billion was re-invested in the oilsands during a difficult year in 2017, while $31.6 billion was reinvested in Canada’s conventional oil and gas sector.
Jason Vincent, president of Calgary-based Matco Financial, said he was surprised by the decision, as HSBC had been trying to gain a larger share of the Canadian energy financing market in recent years.
“The view that we would have here is that the cost of capital goes up,” Vincent said of HSBC’s move, adding that oilsands are long-term, capital intensive projects.
Vincent said he expects other banks to move in and court oilsands companies as a result. “It’s good business. It’s long-term business,” he said.
At least one large Canadian bank took the opportunity to tout its investments in the oilsands.
“We are proud to contribute to Canada’s prosperity by financing environmentally and socially responsible energy projects,” RBC Capital Markets spokesperson Andrew Block said in an email.
“We are committed to the safe development of resources and use a rigorous process to identify and assess potential environmental and social issues associated with the projects we finance,” he said, adding the bank believes carbon pricing and investments in clean innovation will help Canada reduce its carbon emissions.
HSBC’s decision also led to some frustration within the Canadian energy sector, which is locked in a public battle with governments to get new export pipelines built to British Columbia and to the U.S.
“Overall, this is disappointing,” said Ben Brunnen, vice-president, oilsands of the Canadian Association of Petroleum Producers.
He added that HSBC’s market share was small and so, “from our perspective we don’t anticipate this will have a substantial impact on our sector.”
Asked whether HSBC’s decision would hurt its relationships with existing customers, the bank said it was being transparent with the industry.
“We’ve got long-standing, good, open dialogue with our energy customers and we’ve been very open with them about our sector policies, including this latest refresh,” said Sharon Wilks, assistant vicepresident, public affairs for HSBC Canada.