Europe’s largest bank has joined the list of global investors retreating from new financial commitments in the fossil fuel industry, including investments in oil-rich Alberta.
HSBC, whose global assets total more than $2 trillion, announced Friday that as the climate change crisis deepens, it will no longer finance new coal-fired power plants (with a few targeted exceptions), Arctic drilling or new oilsands projects, including pipelines.
The announcement comes as part of strengthened “energy policy” that aims to help customers transition to a low-carbon economy in a sustainable way, while “closing relationships with those who do not meet minimum standards.”
“We recognize the need to reduce emissions rapidly to achieve the target set in the 2015 Paris Agreement to limit global temperature rises to well below 2 degrees Celsius, and our responsibility to support the communities in which we operate,” said Daniel Klier, HSBC’s global head of sustainable finance, in a Friday morning press statement.
A new list of ‘prohibited business’
HSBC’s policy update comes with a long list of “prohibited business,” which includes new offshore oil and gas projects in the Arctic, new greenfields oilsands projects, new large dams for hydroelectric projects that are inconsistent with the World Commission on Dams Framework, and new nuclear projects that are inconsistent with International Atomic Energy Agency standards.
The multinational bank confirmed that its ban on new greenfield oilsands projects includes new pipelines, and said that in the case of new coal-fired power plants, its only exceptions will be for Bangladesh, Indonesia and Vietnam, in order to “appropriately balance local humanitarian needs with the need to transition to a low carbon economy.”
HSBC plans to phase out its lending for the development of new coal-fired power plants in high-income countries by Dec. 31, 2019, and anticipates that its other commitments to the oilsands sector will reduce over time.
Greenpeace Canada welcomed news of HSBC’s new energy policy warmly, and called for Canada’s Toronto-Dominion Bank and the Desjardins Group to follow suit.
“Europe’s two biggest banks saying they will not finance new tar sands pipelines sends Canada’s oil industry and its political boosters a message they can’t afford to ignore,” said Keith Stewart, Greenpeace Canada’s senior energy strategist, in a news statement.
“Financial institutions around the world are seeing the reputational and material risks these pipelines pose in a post-Paris world where respecting Indigenous rights and the need to transition off of fossil fuels is smart business and not just good public relations. Before deciding to write a cheque to Kinder Morgan, Justin Trudeau should ask himself if he wants to rush in where HSBC fears to tread.”
Canada’s oilsands are rich deposits of bitumen, a tar-like heavy oil, and are estimated to contain the world’s third largest reserve of crude oil after Saudi Arabia and Venezuela. But oilsands production also requires large amounts of water and energy to extract, which makes its operations more costly than conventional oil production. It also makes the sector the country’s fastest growing source of greenhouse gases.
Trudeau has touted his government’s Canada-wide climate change plan, along with a commitment by Alberta Premier Rachel Notley to cap the total carbon pollution from the sector as part of its provincial climate change policies.
But the prime minister has warned that all of these commitments could fall apart if Canada is unable to build a new pipeline from Alberta to the west coast of British Columbia, Kinder Morgan’s Trans Mountain expansion project.
A long list of lost investors
Over the years, the fossil fuel sector has lost a number of major investors, which have either reduced, eliminated or committed to phase out support for coal, oil and gas, through a variety of different pledges. It’s part of a global divestment movement that so far includes France’s BNP Paribas, the World Bank, insurance giant AXA, ING, and Sweden’s largest pension fund, AP7, among others.
In Canada, more than 30 universities, faith-based organizations, NGOs, philanthropic groups and other institutions have made such commitments, including Laval University in Montreal, the Canadian Medical Association and the Windsor University Faculty Association. Major oilsands pipeline proposals, including TransCanada’s cross-country Keystone XL pipeline, Enbridge’s Line 3 replacement, the now-defunct Energy East proposal, and the Trans Mountain expansion, have propelled the movement forward.
Advocates of the divestment movement are concerned that more new pipelines will push Canada’s climate change targets out of reach, while pipeline supporters argue that new fossil fuel projects can be balanced with climate objectives through stringent environmental standards and provide much-needed jobs.
The Canadian Energy Pipeline Association (CEPA), which represents the country’s transmission pipeline companies, said it had no comment on HSBC’s decision to retreat from fossil fuel investments, including Canada’s oilsands, as it’s a “business decision taken by an individual financial institution.” The association has, however, piped up in favour of federal intervention in the Kinder Morgan stalemate between Alberta and British Columbia, which recently resulted in a threat from the Texas-based company to cancel the Trans Mountain expansion altogether.
“CEPA calls on the federal government to use ‘every tool in the toolbox’ to ensure the expansion by Trans Mountain,” said its president and CEO Chris Bloomer in an April 9 news statement. “The project is now at a critical juncture where immediate concrete actions by the federal government are needed to ensure absolute certainty that the project will be built.”
In the midst of great uncertainty around the fossil fuel sector, CEPA has called on provincial and federal leaders to signal to the world that “Canada remains open for business.”
This article originally appeared on NationalObserver.com.