Financing the low-carbon economy

Financial institutions need to work together to accelerate the transition to a low-carbon economy, according to HSBC Group Chief Executive Noel Quinn.

Mr Quinn was speaking to mark the launch of a new report by the Climate Finance Leadership Initiative (CFLI) – a coalition of seven organisations, including HSBC, that seek to mobilise private-sector capital to tackle climate change.

He said that initiatives such as CFLI were putting the foundations in place to address the scale of the climate challenge.

“With an estimated USD90 trillion of infrastructure investment expected by 2030, working together now will enable market participants to price climate risk and effectively allocate capital to deliver a low-carbon future,” he said. “At HSBC, we have committed to providing USD100 billion of sustainable finance by 2025. To date, we have put USD36.7 billion to work and recognise there is much more to be done.”

Founded in January by the UN Special Envoy for Climate Action Michael Bloomberg, the CFLI brings together commercial and investment banks, asset managers, insurers and a utility company to help facilitate the financing objectives included in the 2015 Paris Agreement.

The organisation’s new report – Financing the Low-Carbon Future – outlines a series of challenges for financing the transition to a low-carbon economy. For example:

• Industries such as steel, shipping and agriculture offer relatively few low-carbon investment opportunities or green alternatives to high-emission activities
• Some emerging markets face particular difficulties in attracting capital for clean energy projects
• Moving away from carbon-intensive business models, such as coal-fired power plants, may have a significant financial and social impact on local communities

The report goes on to make a series of recommendations on how to overcome these barriers. It emphasises the importance of creating partnerships across private finance, public finance and public policy.

For example, banks and public bodies could work together to develop public-private risk-sharing models that encourage investment in new low-carbon technologies. Development banks could work with political leaders in emerging markets to create the right conditions for increased private investment in green energy. And major employers in industries transitioning to lower-carbon business models could work with policymakers to develop retraining schemes for employees.

The report’s findings were showcased at New York Climate Week, where experts from HSBC joined other financial institutions, NGOs and businesses to discuss the global transition to a low-carbon economy.

Read the full report on HSBC’s Centre of Sustainable Finance website (opens in new window)