Five financial institutions have signed up to the
Climate Principles, the industry’s latest attempt to bolster its
sustainable credentials. But how will the recession impact such
pledges? Dan Jones talks to Francis Sullivan, HSBC’s adviser on the
environment and chair of the Climate Principles.

Francis Sullivan, HSBC’s adviser on the environment and chair of
the Climate Principles, believes that banks’ renewed focus on the
bottom line will not inhibit their commitment to eco-friendly

In December, HSBC, Crédit Agricole, Standard Chartered, Swiss Re
and Munich Re became the first firms to sign up to the Climate
Principles, which seek to encourage environment-focused best
practices among financial institutions (see RBI 604).

The move comes at a time when the concept of sustainable banking
practices faces its sternest test yet in the shape of the global

Trying times

In 2008, such issues understandably took a back seat to
questions over the stability of the banking sector itself. Sullivan
told RBI that the December announcement was important from
the perspective of “keeping the process going”, but remained
confident over the long-term viability of the initiative.

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“Everything that the financial services and banking sector has
been involved with has been affected by the subprime crisis, the
credit crunch and now the emerging global recession,” Sullivan
said. Some 20 to 30 banks have been part of the ongoing
discussions, though some institutions are thought to have put their
sign-up plans on hold for now as they focus on weathering the
economic storms of 2009.

The same concerns could theoretically be applied to
money-conscious consumers, but Sullivan points to research produced
by HSBC in October last year showing how climate change remains
more important than the global economy to a significant proportion
of global consumers.

“What we wanted to try to do was to answer the question of
whether people turn away from the environment in a recession or
downturn or whether it remains a core concern. We concluded that it
was a core concern, and that it was right for us to continue with
what we’d already been doing with climate change,” he

A sustainable tomorrow

The Climate Principles, seen as “a framework for climate change
best practice for the financial sector”, are intended to span the
breadth of a bank’s business, encompassing commitments on reducing
greenhouse gas emissions from operations as well as “strategic
direction” across all business lines, including retail banking.

Under the terms of the agreement, the signees have agreed to
publicly disclose their progress on an annualised basis. In
addition to qualitative and quantitative targets for reducing
greenhouse gases, the five groups are each required to select a
senior executive responsible for the organisation’s strategy or
position, and to improve employee awareness through training
programmes and other methods.

The framework is intended to build on the Equator Principles, a
2003 initiative aimed at encouraging socially and environmentally
responsible project financing among financial institutions.

Sullivan is hopeful that the Climate Principles will see the
same growth in sign-up rates enjoyed by the 2003 agreement, which
were initially adopted by 10 banks but have now been signed by 63
institutions around the world and covers 90 percent of cross-border
project finance.

A significant number of consumers remain anxious for governments
and other organisations to do more. In HSBC’s Climate Change
Monitor 2008, a survey of 12,000 people across 12 markets
worldwide, 43 percent placed climate change ahead of
global economic stability in their list of concerns.

This trend was particularly pronounced in developing markets,
whose populations gave greater weight to the issue than those in
developed markets such as the UK and the US.

In many markets, however, levels of concern had fallen sharply,
a fact the research attributed to the lack of decisive leadership
from governments. This, the report noted, is feeding into “a lack
of momentum for a consumer-led approach to tackling climate

Benefits from the bailouts

Sullivan believes that the raft of economic stimuli being
prepared by governments attempting to stem their nations’
respective downturns could help reinvigorate the environment

“With the green deals being talked about, we’ll see a
stimulation of the greener side of the economy. This will focus on
everything from energy security to climate change,” he said.

President-elect Barack Obama’s estimated $800 billion stimulus
package, for example, will see a sizeable portion of that amount
dedicated to improving the energy efficiency of public buildings
and other green initiatives.

“I think if you step back a bit there probably will be
regulatory changes taking place increasingly quickly in a number of
consumer markets which we’ll have to follow closely,” said

“If you look at what’s being talked about and proposed in the US
at the moment and also the recent agreements in the EU, this is
going to shape decision making for companies and also affect
individuals – the way they spend money, the way they invest. It
creates a shift to a whole series of normal business processes that
financial services are involved with.”

The sense of a need for more concrete governmental action on the
environment was reinforced by a separate HSBC study released at the
end of 2008 showing that just 4 percent of people in emerging
markets believe that emissions should be allowed to increase in
order to let their economy grow.

But a consumer desire for a firmer hand on climate change can
still provide problems for banks: individuals’ acceptance of the
need to make changes to their purchasing decisions or lifestyles
fell by 29 percent and 19 percent, respectively when compared with
2007 figures. It is perhaps for that reason that Sullivan is keen
to emphasis that the current phase is still focused on raising
awareness as opposed to a radical rollout of green-only

“If you think of oil/aviation industries it’s obvious where the
eco connection is – with financial services it’s much less
apparent,” he explained. “Most people use their credit cards to
defer paying for a couple of weeks … but the potential really is
quite great if you think about the range of services provided to

To date, most of HSBC’s green initiatives have taken place in
more mature markets. In March 2008 the bank launched its first
“green” credit card in Hong Kong, and recruited Hollywood actor
Leonardo DiCaprio to champion the product (see RBI 589).
The bank extended the offering to the US in May under the ecosmart
MasterCard brand, joining others such as GE, Wells Fargo and Citi,
all of whom have launched eco-linked initiatives in the US in
recent years (see RBI 582).

From a retail banking perspective, Sullivan believes that the
research findings imply that there are also significant
opportunities to launch environmentally-friendly products in
developing markets.

“Countries like Mexico, Brazil, India and China are far more
concerned, committed and optimistic in responding to climate change
than the more traditional developed markets in Europe and North
America”, he said.

Nonetheless, Sullivan believes there still exists a grey area
between customers’ perception of what environmentally-friendly
banking should constitute and what is feasible for the industry at
this stage.

“There is take-up of some of the more innovative current
accounts or credit cards for instance, but there is currently a gap
between what banks can provide customers from an environmental or
sustainable point of view and what is realistically possible.”

Looking to the future

HSBC’s own environmental record has long been a point of pride
for the bank; this is reflected in its position at the top of
indices such as the quarterly ethical rankings from Swiss research
firm Covalence.

The latest quarterly update ranked HSBC as the most ethical
financial institution across all metrics, and the third most
ethical firm across all sectors. Yet for Sullivan, the significance
of the Climate Principles is one borne out of collaboration and
information sharing.

“As well as growing the number [of institutions to have signed
the Climate Principles] we want to give it better geographic
balance. We think that banks who join will strengthen the whole
sector because we have a central point and focus for sharing
information, for seeing what works and what doesn’t,” Sullivan

“What we need to do as banks is to try and understand what that
risk and opportunity is going to mean and over what timeframe –
which particular sectors or geographies are either going to be
immune or are going to benefit from a change in climate. It does
make sense to try and share as much non-client sensitive
information as we can.”

% of peopl eranking climate change as more of a concern than the global economy, Sept/Oct 2008

% of people 'personally making significant effort to reduce climate change', Sept/Oct 2008