HSBC adds greenwashing to risk matrix

HSBC has added greenwashing to a list of risks it foresees in its future ability – and the future ability of other banks – to access capital markets.

HSBC adds greenwashing to risk matrix

The addition was confirmed through the bank’s latest annual report and accounts this week, which also confirmed Q4 2022 profits of more than £4.3bn – an increase of some 90% year-on-year.

“Expectations with respect to the intersection of environmental, social and governance (ESG) issues and financial crime as our organisation, customers and suppliers transition to net zero, are increasing, not least with respect to potential ‘greenwashing’,” the report states, in a section on top and emerging risks driven by external factors.

“Companies also face a heightened regulatory focus on both human rights issues and environmental crimes, from a financial crime perspective,” the report adds.

Elsewhere in the report, HSBC confirms that it will update its climate plan by the end of the year, including new measures to measure and address climate-related risk. “We are also enhancing our approach to greenwashing risk,” this section adds.

HSBC was in the headlines for greenwashing late last year, when the UK’s Advertising Standards Authority (ASA) banned two of its out-of-home adverts on the grounds that their environmental claims could be misleading. The adverts used the tagline “climate change doesn’t do borders”. One of the adverts stated HSBC’s aim to finance the planting of two million trees in the UK, in partnership with the National Trust, and the other highlighted its plan to finance billion of dollars of low-carbon activities this decade.

The ASA sided with campaign group Adfree Cities, which claimed that the adverts could lead viewers to conclude that HSBC’s overall financing activities had a positive impact on the climate. HSBC is believed to have provided $87bn in financing to fossil fuel companies between the start of 2015 and the end of 2021.

HSBC stated that it merely wanted to highlight “two tangible activities” and noted that the adverts contained information on how to find more detailed information on its broader environmental commitments, but the ASA upheld the complaint.

HSBC also attracted unwanted attention from the media and from green groups earlier in 2022, when its then-head of responsible investment Stuart Kirk gave a speech downplaying physical climate risk.

He stated that humans “will continue to be fantastic at adapting to change” and asked: “Who cares if Miami is six metres underwater in 100 years?”.  Kirk resigned last July and is now a freelance columnist and public speaker, with a regular column in the Financial Times.

Thankfully, HSBC’s latest report states that ESG risks, including climate risk, are becoming more likely in frequency and greater in scale. It states that it will continue to shape a risk management approach here with more qualitative climate risk metrics.

Mega profits for banks

As noted above, HSBC’s annual report and accounts confirmed a significant uptick in profits.

This trend has been observed at other banks too, with Barclays, HSBC, Lloyds TSB, Natwest and Standard Chartered set to collectively post annual profits of £37.4bn for 2022.

These are the highest collective profits since before the 2008 financial crash. Some ESG commentators and groups have argued that it is unethical for banks to rake in this level of profits while the general public – their customers – grapple with the cost-of-living crisis.

“These profits are the chiefly result of higher interest rates paid by the public, rather than any increased efficiency or better service to customers,” said Positive Money’s executive director Fran Boait. “Rather than imposing more costs on ordinary households, the Government should  tax the windfall profits of banks in order to lift households out of fuel poverty and end the dependence on food banks that has come to mark so many families’ daily experience.”

Similar lines of argument have been taken against fossil fuel giants recently, as they too posted outsized profits. Some, including BP, even used the increased profitability of fossil fuels to scale back their climate commitments.

Learn about avoiding greenwashing at edie 23

Taking place in London on 1-2 March 2023, edie’s biggest annual event has undergone a major revamp to become edie 23, with a new name, new venue, multiple new content streams and myriad innovative event features and networking opportunities.

edie 23 will take place at the state-of-the-art 133 Houndsditch conference venue in central London. Held over two floors, the event will offer up two full days of keynotes, panels, best-practice case studies and audience-led discussions across three themed stages – Strategy, Net-Zero and Action.

Click here for full information and to book your ticket.

The Competition and Markets Authority’s Cecilia Parker-Aranha will be speaking on Day 2 of edie23 ( March 2) during a fireside chat on ‘greenwash vs greenhush: Striking the right balance with your sustainability communications’. This session will be chaired by Natura & Co’s global director of advocacy Charmian Love.

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie