HSBC Holdings plc Sustainability Report 2007

Climate Change
A global commitment
The UN Climate Change Conference took place in Bali in 2007 where the
US joined the new consensus in favour of long-term action on climate
change. The European Union maintained its leadership on the issue,
committing itself unilaterally to a ‘20:20:20 vision’ (a 20 per cent reduction
in emissions, 20 per cent increase in energy efficiency, and 20 per cent of
energy obtained from renewable sources by 2020), with key member
states, such as Germany, setting the pace. Emerging markets also
participated, with China launching its first climate change programme.
One of the more significant points in the Bali Roadmap – the agreed action
plan for the period up to the next UN Climate Change Conference in
Copenhagen in 2009 – is the inclusion of a pledge to reduce emissions
from deforestation.
Why should climate change concern HSBC?
Climate change is not just an environmental issue, but an economic and a
social one as well.
Climate change presents both risks and opportunities for our business,
and the potential impact on HSBC is far reaching. For HSBC, climate
change is primarily an economic development issue that may affect
Comment from Ceres
The financial sector plays a critical role in tackling climate change. As
one of the world’s largest industries, with US$6 trillion in market
capitalisation, banks are key players in combating the impacts of
climate change and in supporting the investments necessary to
encourage the world economy to reduce greenhouse gas emissions. To
gauge banks’ progress in addressing the risks and opportunities posed
by climate change, Ceres in January 2008 released a report, Corporate
Governance and Climate Change: The Banking Sector. The report
examines how 40 global banks are addressing climate change through
their governance structures, support for public policy, carbon
accounting, strategic planning and direct actions.
HSBC proved its commitment to both strong governance and concerted
action on climate change by receiving the highest score in the report –
70 out of 100 points. HSBC’s commitment to become ‘carbon neutral’
in 2005 has meant that the Group now has a headstart over the
competition. Leadership on climate change starts at the top, with
HSBC’s Board of Directors actively engaged in the Group’s climate
strategy and public policy position. The Group recognises its role in
promoting the shift to a low-carbon economy and managing the risks,
while benefiting from the opportunities that this brings. HSBC scored
well due to its actions to reduce greenhouse gas emissions through
energy-efficiency investments, financing low-carbon technologies,
services to help customers manage the physical risks of climate change,
and insurance products to support renewable energy and the carbon
markets.
Despite its strong performance, HSBC and every bank can do more to
address climate change, especially given the scientific consensus that
significant emissions cuts must begin now. HSBC needs to make
climate change a core part of its business strategy and to reach out to
its supply chain, employees, and expand its products.
emerging economies more than developed ones. It is therefore central
to the Group’s emerging markets strategy.
With 330,000 employees and around 10,000 offices around the world,
climate change events could affect our decisions on where to locate our
operations, owing to the impact on populations, demographics, food
availability and pricing and health.
Our clients would be affected in similar ways, with the increased frequency
of droughts, floods and storms having a particular impact on those relying
on agriculture, transportation, tourism and the infrastructure industry.
As adviser, lender and investor, we can play an important role in
encouraging the companies and projects we finance to manage climate
change-related risks and opportunities. Seen less and less as a purely
environmental phenomenon, climate change also has the potential to
affect businesses through regulatory change and through new
opportunities to invest in companies and assets. Efforts to mitigate
and adapt to the effects of climate change can yield opportunities. A
considerable market already exists for clean energy and the technology to
deliver it. According to New Energy Finance, a specialist provider of
The Group should require its suppliers to assess and disclose their
carbon footprints and plans for reducing emissions, and should share
its expertise on how to do this efficiently and effectively.
HSBC has some 330,000 employees, who could potentially be a huge
force for change. The Group has started to engage and educate
employees about climate risk, and to encourage them to develop
strategies to integrate it into their work. HSBC should look to take this
a step further by developing a programme to support employees in
reducing their personal greenhouse gas emissions.
Finally, HSBC has started to develop climate-specific products, but
there is considerably more opportunity for investment. It should engage
more heavily in emissions trading schemes and develop risk
management, derivative and guarantee products to support the carbon
trading market. The Group should set and disclose greenhouse gas
emission reduction targets for its lending and investment portfolios,
and operations.
Banks have the reach, influence and access to capital required to play
a major role in addressing climate change, and HSBC should continue
to demonstrate leadership in this effort.
Mindy S Lubber, President, Ceres
Ceres is a leading coalition of investors, environmental groups and
other public interest organisations working with companies to
address sustainability challenges such as climate change. It also
directs the Investor Network on Climate Risk, a group of 60
institutional investors with collective assets totalling US$5 trillion
focused on the business impacts of climate change.
For more information, visit:
www.ceres.org or
www.incr.com
12 HSBC Holdings plc Sustainability Report 2007