HSBC will stop financing new oil and gas fields and will not on board new clients which are investing heavily in exploration.
The bank said its move to end financing, for all and any new fields where a final investment decision was taken after 31 December 2021, is consistent with the IEA’s Net‐Zero Emissions (NZE) by 2050 scenario, a timeline it shares.
HSBC said it will no longer provide finance, either through capital markets or lending, for the purpose of new oil and gas fields and related infrastructure. It said it will not start a new relationship with a prospective client that has more than 10pc of its planned oil and gas capital expenditure (capex) in exploration, or has more than 10pc of production volume from ultra-deepwater, shale oil or extra heavy oil projects.
The bank will also demand prospective clients have clear plans for elimination of flaring by 2030 and reduction of methane emissions by 2025 in the EU and OECD countries, and by 2030 for the rest of the world. But HSBC said it will continue to provide finance and other services to existing oil and gas fields, so oil and gas supply can “meet current and future — declining — global demand”.
“Our approach is to prioritise real world emission reductions as we support our clients in delivering the energy transition alongside security of supply,” HSBC said. “Fundamentally, we will continue to support energy clients that take an active role in the energy transition and who apply relevant robust industry standards.”
“Natural gas will play an important role in the energy mix beyond 2050 due to the critical role it plays in a hydrogen economy which is a central component of a net zero energy system,” HSBC said, adding that it has “appetite” to finance green or blue hydrogen projects.
The move by HSBC comes after question were raised at the recent UN Cop 27 climate summit about role of the finance sector, and particularly about implementation of pledges made at Cop 26 a year earlier. Non-governmental organisation (NGO) ShareAction said many European banks that had signed up to the IEA-aligned Net Zero Banking Alliance (NZBA), which includes HSBC, were still funding new fossil fuel projects. The NZBA initiative, established last year, has more than 120 banks as signatories, representing nearly 40pc of global banking assets.
HSBC does not disclose how much financing it provides for the oil and gas sector. NGO the Rainforest Action Network put this number at $86.53bn in the 2016-19 period — a figure that includes thermal coal, a sector from which HSBC has begun to withdraw.
HSBC has an interim target to reduce the absolute emissions of activities that come under its wholesale credit and project finance criteria by 34pc by 2030, compared with 2019 levels. This includes emissions from the power sector, and HSBC said today it will not provide new finance for new oil-fired power generation. This also apply for new unabated gas-fired power plants and the conversion of existing coal-to-gas-fired power plants, “unless the client demonstrates to HSBC that the new power plant is part of the client’s overall transition plan to achieve abated power generation”.