(Bloomberg) --HSBC Holdings has released its first ever so-called transition plan, laying out a path to slashing financed emissions from its books amid a wider recalibration across the banking industry.
The bank didn't unveil any new climate commitments, but mapped out the changes it sees as necessary to decarbonize the heavy-emitting industries it still finances.
"The radical change in the shape of many industries required by net zero cannot be achieved by any one organization or part of the financial system alone," Chief Executive Officer Noel Quinn said in the report published on Thursday. "Our own ability to become a net zero bank by 2050 is dependent on the pace of decarbonization in the real economy and on our customers' ability to transition their business models."
As pressure mounts on banks and asset managers to address the climate risk of their capital allocations, industry executives are increasingly at pains to establish a list of caveats and conditions. These include ensuring the process is profitable and that clients, regulators and governments provide the necessary backing.
"Our ability to transition relies on decarbonization in the real economy – both the supply and demand side – happening at the necessary pace," HSBC said.
Even so, the finance industry is increasingly adapting its business models to a world in which high-carbon clients will be too risky to keep on their books. Many are responding by revamping their investment and corporate banking units to create teams dedicated to transition clients, with Barclays among recent examples. BNP Paribas and Citigroup have also taken similar steps.
The New York megabank unveiled the most complete accounting to date of its carbon footprint, and pledged to further reduce emissions from various high-emitting industries. Climate activists offered a mix of praise and concern.
Quinn said that HSBC sees "significant commercial opportunities in helping to finance the new economy, transition to a new type of sustainable economic growth, and create a more secure and resilient planet."
The bank's vision for its role in the net zero transition consists of helping high-carbon industries to develop less carbon-intensive business models, financing new emissions-cutting technologies and building sustainable supply chains.
Celine Herweijer, chief sustainability officer, said the transition plan allows HSBC to describe "what net zero means" for the bank. The lender's "starting point in the transition to net zero is one of a heavy financed emissions footprint," as a function of its geographic footprint in many of the most heavy-emitting countries and industries, according to its report.
"I think it's important for us to be clear on who we are as a bank, the clients we actually serve, the markets we are actually in and therefore the role we can actually play in the transition," said Herweijer. "We have a heavy footprint supporting some of the large national power producers across Asia, and their ability to transition will make or break the world's ability to transition"
HSBC is one of the first major banks to publish a transition plan, which Quinn said represent a "key mechanism" for driving decarbonization. The bank will update its plan — and its level of ambition — over time as climate science and methodologies for measuring progress evolve, he also said.
