Media briefing HSBC and fossil fuel finance Why the UK’s biggest bank needs to pull out of coal October 2013

HSBC is one of the biggest banks in the world. It likes to and shares. It has lent billions of pounds to some of the project an image as the world’s ‘local bank’ and highlight world’s biggest fossil fuel companies. This briefing gives a its commitment to responsibility. But behind the slogans, short summary of why HSBC needs to stop bankrolling coal, there is a very different reality. HSBC’s investment banking and end its involvement in the fossil fuel sector as a whole. arm is the UK’s biggest underwriter of fossil fuel bonds Why HSBC? There are several reasons why immediate action should be taken to stop banks like HSBC supporting these companies: HSBC is the biggest bank in the UK and one of the biggest in the world. It is valued at over £120 billion and has assets •• Climate change. The carbon emissions of coal are higher worth over £1.6 trillion1 . It has great power and influence than for any other fuel in the world. Recent estimates within the financial sector as a whole. Despite all its show that the vast majority of the world’s coal reserves marketing slogans about sustainability and its sponsorship will have to be left in the ground in order to avoid of various climate change projects, HSBC is doing little to devastating climate change. move away from investment in fossil fuels. •• Destroying lives in the global south. Coal mining is At the moment, HSBC remains the biggest single UK responsible for devastating local pollution in the global supporter of the fossil fuel industry through its investment south as well as the displacement of thousands of people banking arm. Between 2010 and 2012, HSBC helped fossil from their homes. People, including in Indonesia, are fuel companies raise just under £75 billion. This is almost increasingly calling for an end to the destructive effects 4 double the figures mustered by rival banks, Barclays and of coal mining . RBS2. This figure does not include lending to companies •• Carbon bubble. Banks and other financial players such as BP, which received loans worth over £3 billion from have created a carbon bubble in the global economy. a group of banks including HSBC in 20103. Only a small fraction of fossil fuel resources can be burned without breaking international commitments Why coal? to tackle climate change. This means most fossil fuel While most of HSBC’s fossil fuel finance is given to the oil assets are worthless. A sudden correction of the current and gas sector, the bank is also involved in facilitating the overvaluation of fossil fuel companies could cause a new coal mining industry through its support for global mining global financial crisis. giants like Anglo American, and BHP Billiton.

Money raised for fossil fuel companies through bond and share deals 2010 - 12 80 70 60 50 40 30 20 Money raised (£billion) 10 0 HSBC Barclays RBS Standard Chartered Lloyds HSBC - Not as green as it claims Case study: Cerrejon coal mine HSBC claims that it takes climate change seriously. The The Cerrejon coal mine in Colombia is one of the biggest bank claims to have implemented strong criteria limiting and most destructive coal mines in the world. It has led its financing of coal. But a closer look at its Energy Sector to the eviction of whole villages from their land and Policy reveals that most of HSBC’s guidelines for coal apply threatened the Rancheria River, the only reliable water only to the small fraction of its lending that goes directly to supply in the La Guajira region. HSBC provides financial specific projects (project finance) and not to the financing support to the three multinational companies involved in of the companies behind the projects, which is a far bigger the project (BHP Billiton, Anglo American and Xstrata). For source of money for coal. The only guideline that applies example, BHP Billiton has raised £1.863 billion in bond to general corporate lending is that an ‘analysis of carbon issues underwritten by HSBC since 20096. HSBC has also intensity’ must take place if the company has over 3000MW contributed £107 million and £262 million respectively to of coal capacity in its portfolio. syndicated loans for Anglo American and Xstrata over the same period.7 HSBC’s policy also covers power plants only, meaning that there are no limits on HSBC’s lending to coal mining companies like BHP Billiton and Anglo American. Overall, What needs to be done HSBC’s Energy Sector Policy does little to limit the bank’s investment in coal. HSBC must pull out of coal and take steps towards eliminating its involvement in the oil and gas industry. This HSBC previously claimed to be the ‘world’s first carbon means an end to financing big players in the coal industry, neutral bank’, but has since said that it is no longer carbon like BHP Billiton and Anglo American. neutral because carbon markets didn’t work in the way it anticipated. It is time for the government to take action to put an end to banks bankrolling companies engaged in damaging HSBC’s definition of what constitutes its own carbon fossil fuel projects in the global south. Carbon trading emissions is very narrow. It includes only its direct carbon schemes and voluntary codes of conduct are failing. If the emissions and the carbon emissions which come from the UK government is serious about tackling climate change, it electricity it purchases. HSBC does not consider any carbon must regulate the UK banking system to move it away from emissions which come from bankrolling fossil fuel firms its dependency on carbon intensive industry. to form part of its carbon footprint5. As a result HSBC’s previous supposed carbon neutrality only referred to its Contact annual spend of £10 million a year on carbon offset schemes For more information on this issue, please contact Miriam and other projects, like improving the efficiency of light Ross, media officer, (+44) (0)7711 875 345, miriam.ross@ bulbs used in bank branches. £10 million is less than 0.0007 wdm.org.uk per cent of HSBC’s overall assets. The billions of pounds that HSBC helps fossil fuel companies raise in loans, bond and share issues every year are excluded from its carbon neutral calculation.

1 As of the end of 2012. See: http://www.hsbc.com/~/media/HSBC-com/InvestorRelationsAssets/annual-results/pdfs/hsbc2012arn. ashx 2 WDM research sourced from commercial databases. 3 ibid. 4 For more information on this, see WDM’s recent report, Banking while Borneo burns: How the UK financial sector is bankrolling Indonesia’s fossil fuel boom: http://www.wdm.org.uk/exposed-how-our-banks-finance-climate-change 5 Based on declared costs over five years of $90 million in HSBC and Carbon Neutrality report 2008 available here: http://www. banktrack.org/manage/ems_files/download/carbon_neutrality_plan/080206_hsbc_and_carbon_neutrality_feb_2008.pdf 6 WDM research conducted by Profundo using commercial databases. 7 ibid.

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