HSBC switches off funds to high carbon energy projects

HSBC has become the latest financial institution to turn its back on financing high carbon energy projects after ruling out funds for new coal-fired power plants.

The British bank will also stop providing financial services to any new offshore oil and gas projects in the Arctic as well as oil sands projects, which both face fierce criticism from environmental groups.

HSBC set out its dramatic shift in energy policy ahead of its annual general meeting in London, in a move that highlights the growing pressure on financial institutions to honour the shift towards low carbon power, mapped out by the Paris Climate Accord.

Daniel Klier, the bank’s sustainability boss, said the decision “reflects HSBC’S ambition to help our customers make the transition to a low-carbon economy in a responsible way”.

“We recognise the need to reduce emissions rapidly to achieve the target set in the 2015 Paris Agreement to limit global temperature rises to well below 2 degrees Celsius, and our responsibility to support the communities in which we operate,” he said.

Other large banks, such as ING, BNP Paribas and BBVA, have all set out similar commitments amid warnings from Mark Carney, the Bank of England Governor, that climate change could destabilise financial systems unless institutions protect themselves.

In addition, Lloyd’s of London is facing pressure from climate change groups to rewrite its rule book so that insurers no longer insure coal projects.

HSBC said it had been significantly restricting its investments in new coalfired power plants since 2011 and “effectively ceased financing” them in 78 developed countries.

It will now stop financing new coalfired power in all countries apart from Bangladesh, Indonesia and Vietnam.

“The bank will consider supporting new coal-fired projects in these countries on a case-by-case basis – and only where a carbon-intensity target is met and independent analysis finds that no reasonable alternative is available to meet the country’s energy needs,” HSBC said. The loophole is likely to annoy environmental campaigners because only a low number of new coal plants are still looking for funding in developed markets such as Europe.

The Government has pledged to end all coal-fired power generation from 2025, in effect issuing a death knell for the few remaining coal plants.

This week the UK set a new record by powering the energy system without any coal-fired power for two days, the first 48-hour stretch since the industrial revolution.