Equator Principles
The Equator Principles provide a risk management framework for financial institutions to identify, assess and manage the environmental and social risks of financing large projects.
The Equator Principles can be applied to project finance with total project capital costs over $10 million, project-related corporate loans and project-related bridge loans, as well as applicable advisory mandates.
HSBC adopted the Equator Principles when they were first launched in 2003. The latest (fourth) iteration of the Equator Principles (“EP4”) came into effect on 1 October 2020.
One of our obligations under the Equator Principles is to report on how we implement them, and the following sections provide an overview of actions we have undertaken.
We act independently and voluntarily in our decision-making. We may consider any project, and we decide whether to finance (and the terms on which we are prepared to finance them) based on our own business interests, priorities, and objectives.
Implementation
HSBC’s procedures for applying the Equator Principles form part of our sustainability risk policies.
For transactions that fall under the scope of the Equator Principles, our global businesses must complete the appropriate implementation template, including the requirements for each applicable Principle, and conduct a risk analysis and recommendation through the credit risk process. An environmental & social subject matter expert within our HSBC Infrastructure Finance business provides initial support and analysis on EP projects and our Sustainability Risk Managers assist our global businesses on interpretation and application of Equator Principles requirements where required. The Reputational & Sustainability Risk team is also responsible for the development and management of the Equator Principles implementation and our internal processes for applying the Equator Principles. We also commission independent consultants, as appropriate, where required under the Equator Principles.
During 2024 the Group Reputational & Sustainability Risk team produced internal training on the Equator Principles and our internal implementation processes, which is available on our intranet for all staff. This provides an overview of EP requirements for all relevant employees, including those new to the Bank.
2024 Equator Principles reporting
As required by the Equator Principles Association, we report the number of transactions we have completed using the Principles, with breakdowns by sector and by region. This is shown in the PDF below. A total of 36 EP aligned deals are reported to have reached Financial Close for 2024.
These consist of 11 Category A, 24 Category B and one Category C project.
The majority of transactions were rated as Category B and are located across the EMEA region in the power sector.
In 2024, 55% of the projects reported globally relate to renewable energy, a 3% increase from 2023.
Additional notes
HSBC’s Equator Principles report (the Report) is prepared for the sole purpose of fulfilling the reporting requirements for Equator Principles Financial Institutions as set out in the Equator Principles. The Report should not form the basis of any third party’s decision to undertake, or otherwise engage in, any activity and third parties do not have any right to rely on it. The Report, by its nature, is not comprehensive and has not (save as expressly set out therein) been independently verified.
In making the assessments and determinations further described in the Report, HSBC uses such information as it determines necessary and relevant in its sole discretion.