HSBC: 2014 marks start of new economic focus on climate

HSBC has said climate change will rise up the corporate finance agenda this year, highlighting three issues - impacts, carbon risk and green bonds - that will lend impetus to this.

The bank has issued a statement in which it states that the next 12 months will mark “the beginning of a new climate agenda” adding that “we should expect much more focus in 2014 on the present danger of climate vulnerability, impacts, loss and damage”.

New detail on observed climate impacts, plus guidance on the severity of climate risks to humans, will be revealed in forthcoming report from the Intergovernmental Panel on Climate Change (IPCC) in March.

HSBC points to the fact that the study will also assess regional vulnerability to climate impacts, such as heatwaves, droughts, floods and wildfires.

“It will likely emphasise that although developing countries are worst hit, many have not yet embedded adaptation and resilience into their economic strategies. Within the G20, we believe India, China, Indonesia, South Africa and Brazil are most vulnerable,” the statement said.

Turning to carbon risk, the bank says that in order to meet global climate goals, inefficient sub-critical coal-fired generation must be replaced with low-carbon alternatives.

It called China and the US the two “carbon elephants” as they collectively account for more than 40% of global carbon pollution, but added that the recent establishment of a US-China Climate Change Working Group should pave the way for a bilateral agreement on phasing out fossil fuel subsidies.

“[This] would be hugely positive and a China-US pact could have a transformative impact on realising a global deal at international talks in 2015,” HSBC stated.

The financial institution also predicted that this year would bring an intensification of interest in green bonds – these are increasingly being used to raise capital for the low-carbon transition.

Within this, there is a fast-growing segment of badged ‘green bonds’ with funds ringfenced for renewable energy, environmental clean-up and energy efficiency and HSBC expects issuance of them to strengthen over the coming months.

Maxine Perella

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