HSBC world’s first major bank to go carbon neutral

6 December 2004

HSBC is the first major bank in the world¹ to commit to going carbon neutral, in a programme that may cost up to US$7 million in the first year. The bank - one of the world's largest - made the announcement on the opening day (6 December) of the 10^th Conference of the Parties of the UN Framework Convention on Climate Change².

HSBC's commitment to carbon neutrality - which involves reducing energy use, buying green electricity and then offsetting the remaining carbon dioxide (CO₂) emissions by investing in carbon credit or allowance projects³ - is part of a package of environmental measures announced today by the bank to help tackle climate change.

The package also includes a three-year, £650,000 partnership with Newcastle University and the University of East Anglia (UEA) called the 'HSBC Partnership in Environmental Innovation'⁴ - to research climate change, society's awareness of the issues and to develop technologies to overcome some of the problems identified.

Speaking at the launch of the Climate Group in April 2004, when HSBC became a founder member of its Bank Working Group, Sir John Bond, HSBC group chairman, said: "HSBC has a deep and longstanding commitment to the environment, and it is our judgement that climate change represents the largest single environmental challenge this century. It will have an impact on all aspects of modern life. It is therefore a major issue for our customers and our staff, as well for every organisation on the planet, no matter how large or how small."

HSBC's carbon management plan, which commits the bank to carbon neutrality globally, will be implemented in 2005 under the direct supervision of the bank's group chief executive, Stephen Green. Green says: "In 2003, HSBC's CO₂ emissions from using electricity, natural gas, fuel oil and business travel were more than 550,000 tonnes⁵. We need to act now to reduce our emissions. 

"We are setting up a carbon management task force to determine the best way forward. At present, not all allowances and offsets that can be bought have the same environmental value, and as a matter of principle we will ensure that ours are of the highest credibility, and are genuinely incremental.

"We are also determined to make carbon neutrality as cost-effective as possible, and as we move towards better energy efficiency⁶ we expect the annual cost to the bank to fall from the US$7 million it may cost us in the first year."

Already in the top 50 companies globally in terms of climate leadership⁷ and the third highest-rated bank in the Dow Jones Sustainability Index⁸, HSBC believes that corporate social responsibility underpins sustained earnings growth.

Steve Howard, chief executive of The Climate Group, said: "HSBC's decision sets a new benchmark for the financial sector. They will gain a deeper insight into the emerging low carbon economy and be exceptionally well placed to understand the needs of and opportunities for their clients."

The bank's move towards carbon neutrality is to ameliorate the direct impact it has on the environment, with its buildings, air travel, and so on. This complements the actions it is already taking to address the indirect impact it has on environmental and social issues arising when financing projects for customers.

For example, in 2003, HSBC adopted the Equator Principles. These are voluntary guidelines that direct the bank not to lend to projects where the borrower is unable or unwilling to comply with the Principles or the bank's own internal environmental and social policies, whichever carries the higher standard. HSBC is also developing a range of socially responsible investment funds.

Footnotes

1. HSBC Holdings plc is the third largest bank in the world, ranked by market capitalisation.
2. The 10^th Convention of the Parties of the UN Framework Convention on Climate Change takes place from 6 to 15 December in Buenos Aires, Argentina. 
3. Carbon credits and carbon allowances are currently the only way to offset a company's CO₂ emissions. Allowances refer to emission permits that are traded among participants required to operate in a cap-and-trade scheme, where the quantity of permits is restricted by setting an overall cap on emissions. By contracts, carbon credits are acquired by investing in projects that reduce emissions against an agreed baseline. Traditionally, projects to create carbon credits have involved tree planting. 
4. HSBC Partnership in Environmental Innovation
   The 'HSBC Partnership in Environmental Innovation' is a three-year, £650,000 partnership with Newcastle University and the University of East Anglia (UEA). Its aims are to research climate change, society's awareness of the issues and to develop technologies to overcome some of the problems identified.
5. HSBC has developed its own Environmental Reporting System to calculate how much CO₂ is produced by its key country operations. Emissions in 2003 were 558,000 tonnes overall, of which the UK accounted for 152,000 tonnes, the US, Canada and Panama 106,000 tonnes, Asia-Pacific 278,000 tonnes, Brazil 10,000 tonnes and France 13,000 tonnes.
6. HSBC's energy efficiency improvements include the use of low-energy lighting, variable-speed drives in air conditioners and more efficient heat management systems. Additionally, in countries with deregulated electricity markets, Group offices buy green electricity - i.e. generated without using fossil fuels. Currently, the UK, Australia and the US buy green electricity.
7. HSBC is in the top 50 companies in the Carbon Disclosure Project's 2004 Climate Leadership Index. This is drawn from the FT500 Global Index, which means that HSBC is in the top 50 companies globally in terms of climate leadership. The Carbon Disclosure Project is the co-ordinating secretariat for institutional investor collaboration regarding climate change. www.cdproject.net
8. The Dow Jones Sustainability Index. Launched in 1999, the Dow Jones Sustainability Indexes are the first global indexes tracking the financial performance of the leading sustainability-driven companies worldwide. www.sustainability-indexes.com