As the world faces growing challenges with climate change-related issues, the banking sector is a key player in shaping tomorrow’s economy. Dean Lam, Managing Director & Head of Wholesale Banking at HSBC Mauritius, talks to Investor’s Mag about the bank’s approach to sustainability and some major initiatives to support the transition to a greener economy.
Featured in Investor’s Mag, 21th Edition, June 22 – Aug 22
Banking represents one of the most active sectors in sustainability involvement. Could you share more about HSBC’s approach to sustainability?
We’re playing a leading role in mobilising the transition to a global net-zero economy, not just by financing it, but by helping to shape and influence the global policy agenda. We recognize that our planet urgently needs drastic and lasting action to protect our communities, businesses and natural environment from the damaging effects of climate change. We’re mobilising finance to support our customers’ transitions to net zero, accelerating innovation to help scale up climate change solutions and building global partnerships to ensure investment is swiftly channeled towards truly sustainable projects. We recognise and transform our own operations and supply chain to net-zero across HSBC by 2030, we’re asking our suppliers to do the same. We believe we can make the most significant impact by working with our customers to support their transition to lower carbon emissions. It’s a pillar of our ambitions and of our strategy as a business.
What do you believe is a bank’s role in the global climate transition?
Climate change is both an opportunity and a challenge for the banking industry. As a major global bank with strengths in Asia-Pacific and the rest of the world, HSBC Group has a key role to play in today’s global economy. For us, in Mauritius, a country surrounded by vast expanses seas, the prospect of rising sea levels and falling crop yields as the world warms is a threat to our well-being and prosperity. Asia and Africa are on the front line of climate change. If we fail to take substantial action, Asia could face between US$2.8 trillion and US$4.7 trillion in lost annual GDP by 2050 – accounting for more than two-thirds of the impact of climate change on global annual GDP. As for Africa, the challenges could compound for many lower-income and fossil fuel–producing countries, which would need to balance multiple imperatives.
Hence, building a climate-friendly, low-carbon society and economy will need capital, innovation, and a global commitment to shared goals. Although this is arguably the most severe challenge, it is also a huge opportunity. Industries such as information technology, biomedicine, new materials, and new energy are emerging as the new, more sustainable drivers of economic growth. Mauritius will have to work hard to move on from its dependence on fossil fuels for its energy supply. The government has committed to source 65% of its energy supplies from renewable energy by 2030, and we at HSBC are looking for ways and means to support this transition to renewable energy.
How does HSBC support green finance and sustainability? How is the bank helping clients transition to net-zero?
The transition to net zero is one of the HSBC’s four strategic pillars. HSBC has an ambitious plan to prioritise financing and investment that supports the transition to a net-zero global economy – and helps build a thriving, resilient future for society and businesses.
Our climate plan has three elements:
- Supporting our portfolio of customers to make the transition;
- Unlocking climate solutions and innovation;
- Transforming HSBC into a net-zero bank
In October 2020, HSBC set out its ambition to reduce emissions in its operations and supply chain to net-zero by 2030, and to align the bank’s financed emissions at clients’ portfolio level to net-zero by 2050 or sooner.
HSBC Group expects to provide between US$750bn and US$1trn in financing and investment to support its customers across the world, to progressively decarbonise, and help realise the opportunity for long-term, sustainable growth.
In this regard, we have been working with customers in key sectors (garments, financial services, automobile,) to support their transition and together, we are identifying financing opportunities for green projects to ensure alignment with our commitment to transition to a net-zero by 2050.
HSBC has voluntarily aligned our green lending proposition to the Loan Market Association’s Green Loan Principles (the “GLP”) to facilitate and support environmentally sustainable economic activity. The GLP set out a clear framework, enabling all market participants to clearly understand the characteristics of green lending, based on the following four core components:
- Use of Proceeds
- Process for Project Evaluation and Selection
- Management of Proceeds
“HSBC Group expects to provide between US$750bn and US$1trn in financing and investment to support its customers across the world, to progressively decarbonise, and help realise the opportunity for long-term, sustainable growth.”Dean Lam | Managing Director & Head of Wholesale Banking | HSBC Mauritius
Can you tell us about some initiatives that HSBC is involved in here in Mauritius?
We have constantly been enhancing clients’ awareness on Sustainable Business through participation in client sustainable forums, taking a thought leadership role on social media, and supporting our clients to identify and finance their green, climate and sustainable projects. We were delighted to provide financial support to our customer, CIM Financial Services Ltd, on their first Green Funding programme. Similarly, we have supported other customers in the textile and garments sector to green their supply chains through the sourcing of sustainable raw materials. HSBC Mauritius has participated in a landmark sustainable deal for another customer in the black paint industry. We’ve arranged a syndicated multi-bank financial arrangement for that customer to green its supply chain. The transaction supports the client’s ambitious sustainability strategy to reduce carbon emissions, and replace current energy and feedstock with low carbon solutions. It is also geared toward bringing circular products to market and driving greener sustainability ratings for the company. We are looking to support other companies in the automobile sector to bring in more electric vehicles on the market to ensure our transport industry is also moving into more sustainable solutions.
Could you share more about how HSBC includes and empowers employees across the bank on your priorities around sustainability?
The world is changing at an unprecedented rate. Globalisation, climate change, demographic shifts, social cohesion, new technologies, and the pandemic are all making the operating context more volatile and uncertain than any other time in history. Many of these changes will affect us personally. They also affect HSBC, our clients, society and the wider environment. Increasingly, we have found that many employees are looking to work for a company with clear values and a strategic agenda to deal with environmental and social issues. New graduates in particular, see this as critically important. So how are we supporting our employees is through E-learnings on sustainability and get them involved as much as is required in initiatives to explore some of these changes helping them understand the rate of change, direction of travel and the interconnections between the different social, environmental and economic trends. We have modules that also explore drivers for change, the implications for the bank, and the role that each of us can play to help HSBC seize new opportunities and deliver a sustainable economy.
How important do you think sustainable finance is to consumers?
Climate has no borders, and financing our customers’ transition through green and sustainability-linked loans, and sustainable investments is a must. This is because the consequences of climate change will affect all businesses, societies, and countries. Hence, what we mean to say when we speak about sustainable finance is that globally, HSBC will supply USD750 billion to USD1 trillion of financing and investment to support the world’s climate transition in the next 10 years. Advancements in recycling, renewable energy, green transportation, and information technology all fall under the umbrella term of CleanTech. At HSBC, we are helping fund innovations in this space. HSBC identified four megatrends that are shaping the economy today and in the future. Each megatrend drives the global economy and creates risks and opportunities for us.