presentation to investors sustainability at hsbc · step 4: offset our 2006/7 offset portfolio hsbc...
TRANSCRIPT
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PRESENTATION TO INVESTORS
Sustainability at HSBC
MARCH 2008
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Forward-looking statements
This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forward-looking statements represent the Group’s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our Annual Report.
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Agenda
• HSBC’s approach to sustainability– Sustainability strategy– Structure and governance– Risk management– Business development– Footprint management– Community investment
• Key themes– Climate change– Microfinance
• Progress so far
• Q&A
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Sustainability strategy
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Economic
Corporate Sustainability
Social Environmental
Its about taking a position, not positioning…..
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Our Corporate sustainability strategy
WATER
CLIMATECHANGE
WASTE
BIODIVERSITY
POVERTY
EMPLO
YEE ENG
AGEM
ENT
BR
AND
& M
ARK
ETING
RISK
MAN
AGEM
ENT
BU
SINESS D
EVELOPM
ENT
ADVISO
RY SER
VICES
FOO
TPRIN
T MAN
AGEM
ENT
CO
MM
S & R
EPOR
TING
CO
MM
UN
ITY INVESTM
ENT
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Structure and governance
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Corporate sustainability
Group Corporate Sustainability
Risk Management
Brand & Marketing
Employee Engagement
Business Development
Advisory Services
Direct Impact
Footprint Management
Communications and Reporting
Indirect Impact
Indirect Impact
Community Investment
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Risk management
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Sustainability risk management
• Objectives:– Develops policies and processes to
ensure that the Group protects its reputation and brand from environmental and reputational risk
– Ensures that these policies and processes are mainstreamed in the risk assessment and approval process through a programme of communication and training
Policies
Processes
People
Minimising the indirect impact of our lending
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Sustainability risk framework
Group Standards Manual
Group Credit and Risk FIMChapter 4 - Sustainability Risk
Group Credit Policy & Standards LibraryGuidance Notes
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Sector guidelines
Forest land and forest products
Freshwater infrastructure
Energy
Metals and Mining
Chemicals
RISK
TIME
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Equator principles
• Relaunched July 2006
• HSBC led the Working Group
• Updates to Principles
• Updates to IFC framework
• 61 financial institutions
• Estimated 80-90% of cross-border project finance
Changes to the Equator Principles
•US$10m capital cost of project
• Upgrades and expansions
• Advisory
• High Income OECD countries
• Public reporting
• Still assessment, categorisation, action plans, covenants
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Equator principles transactions…..
n/a4n/a4n/a7Transactions declined
1,4075,1842,114
75739
802,7082,383
14134
8091,9171,875
53824
Loans by Category-Category A-Category B-Category C
8,7051035,17176
n/a4,601n/a
67n/a
By Mandate-Lending-Advisory (additional only)
Value (US$ m)No.Value (US$ m)No.Value (US$ m)No.
200720062005GROUP STATISTICS
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Functional management of sustainability risk
Group Sustainable Development (GHQ GSD)
John LaidlowRichard Naughton
Germany (HTDE)Berthold Mutschmann
Canada (HBCA)Louie Hachey
France (HBFR)Paul Collyer
UK & Europe (HBEU)Roger Atkins (Credit Ops)
David Gay (Global Banking & Markets)
Kevin Hutchings (Global Banking & Markets)
Richard Martin (CRM)
South America (HBBR)Danish Qureshi
Middle East (HBME)Lloyd Maddock
Mexico (HBMX)Ruben ChavezCesarea MayaTeresa Caron
Erika Cano
Hang Seng (HASE)Patrick K T Ip
USA (HBUS)Eric Dettmer (Credit)
Sharon Walck (Policy)
Asia Pacific (HBAP)Paul Norton
China (HBAP AOC)Pak Yue Hong
Argentina (HBAR)Moira Trigubo
Turkey (HBTR)Esra Karslioğlu
Chile (HBCL)José Toresano (Credit)
Jorge Rogaler (Global Banking & Markets)
Malaysia (HBMY)Wei Kwang Chong
Indonesia (HBAP IMO)Amol Titus
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Overall risk assessment
C. LOW RISK NO RISK B. MEDIUM RISKA. HIGH RISK
1. LEADER
2. COMPLIANT
3. NEAR-COMPLIANT
4. NON-COMPLIANT
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Project risk
NO RISK (N)
LOW RISK (C)
MEDIUM RISK (B)
HIGH RISK (A)
EQUATOR PRINCIPLES
WORLD BANK/IFC POLICIES AND HSBC POLICIES
ENVIRONMENTAL AND SOCIAL ASSESSMENT CATEGORISATION TOOL
SUSTAINABILITY TOOLKIT
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Client risk
NON-COMPLIANT
COMPLIANT
NEAR-COMPLIANT
LEADER
SUST
AIN
ABIL
ITY
TOO
LKIT
COMMITMENT
CAPACITY
TRACK RECORD
RATINGS TOOL
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Sustainable business development
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Sustainable business development
Capturing the opportunities
• Objectives– Focuses on key areas of business
development in: – Climate change and low-carbon technology– Sustainable forestry– Water infrastructure– Microfinance
– Seeks to identify business development opportunities across all geographies, all customer groups, and all product groups and support business units in capturing them; and to evaluate inbound business referrals
Custom
er groups
Product groups
Countries
Carbon Water
MicroForestry
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Footprint management
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HSBC sets, monitors and reports direct impacts: energy & carbon dioxide and water consumption and waste generation 2005-07 and now 2008-11
Efficiency through targets…
7%7%8%8%
7%7%5%5%
COCO2
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OFFSET
REDUCE
HSBC Mexico Headquarters The new US$150 million headquarters building in Mexico City, 'Torre HSBC', has been designed and built to benefit the local community economically and environmentally, and to reflect local heritage. The environmental initiatives applied to the new building have resulted in 55% less water usage and 40% less energy usage than comparable structures.
1 carbon credit = 1 ton of CO2 avoided• Additional • Credible• Cost effective
We have 813,000t CO2 to manage…
Managing our footprint…HSBC is the world’s first carbon neutral bank
BUY RENEWABLES
We continue to buy electricity from ‘green’ or renewable sources Currently, we purchase green electricity in the UK, the US, Australia, Brazil, Ireland, Luxembourg, Sweden and Switzerland. By purchasing green electricity or paying green tariff, HSBC is helping to support global investment in renewable energy
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Group carbon dioxide emissions – 2006
Energy Savings = Cost Savings
Air Travel14% Road Travel
7%
Other Travel2%
Gas, Fuel Oil8%
Electricity69%
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Step 2: Reduce. Step 3: Buy Renewables.The Global Environmental Efficiency Programme
• Minimising CO2 in Hong Kong• India’s coolest building• Bricket Wood wind and solar trial• Mexico City Head Office• New York’s zero carbon branch
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Step 4: OffsetOur 2006/7 offset portfolio
HSBC purchased 813,000 carbon credits tooffset 2006/7 emissions
Three projects were chosen:– Hydroelectric Facilities in China– Energy Efficiency in Steel Making, China– Water Treatment in a Starch Manufacturing
Facility in Thailand
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Community investment
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A five year, US$100 million programme to tackle the impacts of climate change on people, forests, water and cities
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Key themes: climate change
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Climate change matters...
“HSBC is working to support the transition to a low-carbon economy. As a carbon neutral company, we are proud to be investing in renewable energy technology including wind and solar power and hope that our actions will inspire other financial institutions to do the same.”
We believe that climate change represents the largest single environmental challenge this century and that financial institutions will play an important role in the shift to cleaner energy.
(Stephen Green, Group Chairman, HSBC Holdings plc May 2006)
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Climate change: The Stern review
• CO2 emissions: reduce by 80% by 2100
• Technically and commercially viable solutions exist
• Costs of doing so now: 1% of global GDP (US$184bn)
• Costs of doing nothing: 5-20% of global GDP by 2050
“We have the time and knowledge to act, but only if we act internationally,
strongly and urgently”
(Lord Nicholas Stern: the Chairman’s advisor on economic development and climate change)
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Managing our indirect impacts…
Billion of Tons of Carbon Emitted per Year
14
7
0
Currently projected path
Flat path
Historicalemissions
1.9
14 GtC/y
7 GtC/y
Seven ‘wedges’
205520051955 2105
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Our areas of focus…
• Wind, Solar PV
• Biofuels
• Energy and Transport Efficiency
• Fuel Switching
• Carbon Capture & Storage
• Landfill Gas/Methane Capture
• Geothermal
• Nuclear, Hydrogen
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Our perception of opportunity…
US$ 94bn
Investments in clean energy YTD Sept 2007
US$ 52bn
Global market for biofuels by 2015
US$ 500bn
Markets for low-carbon energy products by 2050
US$ 22bn
Worldwide Solar industry revenues by 2010
US$ 15bn
Fuel cells and Hydrogen market by 2015
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Low Emission Buses, Santiago, Chile
In 2006, HSBC financed a deal to provide 1,779 buses with low carbon emissions to serve 4.5 million passengers in Santiago, Chile.
The project could cut air pollution in Santiago by as much as 77 per cent and is an example of the projects we support under our Carbon Finance Strategy
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Equity Research
HSBC Global Climate Change Benchmark Index
Four Investable Indices:Climate Change
Energy Efficiency & Energy Management
Low Carbon Energy Production
Waste, Water & Pollution Control
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Asset Management
Launched: November 2007
“Climate change is set to become one of the defining investment opportunities in the years ahead”(Nick Robins, Head of HSBC Climate Change Centre of Excellence)
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Partnership for Renewables
HSBC Environmental Infrastructure Fund GB£49m equity investment in public-private partnership with the Carbon Trust
Partnership to develop 500MW portfolio of renewables, powering 230,000 homes in the UK
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Roaring 40’s
HSBC Project Finance Asia non-recourse financing for a 50MW Windfarm in Khandke, Maharashtra, India
Joint venture between China Light & Power and Hydro Tasmania
Exploring purchase options for carbon credits
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What consumers think about climate change…
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Key theme: Microfinance
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HSBC Microfinance strategy
• Microcredit is the provision of small loans to the unbanked - loans of typically less than US$200 - to individuals (usually women) to establish or expand a small self-sustaining business - a microenterprise
• Microfinance is the extension of this concept to include a full suite of banking products -savings, insurance and remittance services for migrant workers to send money home
• Microfinance originated in Bangladesh in 1973• While the original Asian model was based on group lending and cross guarantees, individual lending is increasingly
popular, especially in Latin America• Today there are some 3000 Microfinance Institutions (MFIs), either NGOs or regulated banks, serving 92 million clients• 5 or 6 Enablers based in the US or UK co-ordinate across networks of partner MFIs. These enablers either lend directly to
their affiliates or facilitate funding from donors and commercial sources
• The players:
Donors and Commercial Funding
Microfinance Enablers e.g Accion
Local Affiliates e.g. Compartamos
End clients
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HSBC’s current involvement
• HSBC is currently engaged with Microfinance institutions in:– India– Mexico– Philippines– Russia– Sri Lanka – USA
• HSBC Group Microfinance Strategy
• Mandated by the HSBC Board to expand this business from 5 to potentially 15 countries worldwide
• Country and Product support is critical to success
Expansion targeted in:
• Priority countries: Argentina, Brazil, China, Poland, Turkey
• Next steps...Bangladesh, Egypt, Indonesia, Pakistan,Poland, Thailand
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Our Microfinance experience and expansion strategy
Countries with Rural Bank focusImplementation to follow
USA
Acción
Finca
Unitus
WWB
Mexico
Acción
Finca
Unitus
WWB
Argentina
Acción
Unitus
Brazil
Acción
WWB
(Finca)
India
Acción
Unitus
WWBSri Lanka
WWB
Turkey
(Acción)
(Finca)
China
(Acción)
(Finca)*
Philippines
WWB
Unitus
Bangladesh
WWB
Pakistan
WWB
Indonesia
(Unitus)
Brackets indicate enabler expansion plans
*Both Finca and Acción have authorization to initiate operations in China
First implementation countriesEnabler Countries (Relationships established)
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HSBC Microfinance strategy
• Mandated by the HSBC Group Management Board to expand this business
• Group Sustainable Development to assume global responsibility
• Approach is to engage with the microfinance sector on a commercially viable and sustainable basis, not as philanthropy
• Strategy centres on the need to leverage our strengths rather than try and build expertise/capacity quickly in the short/medium.
• Business should be based on existing HSBC product and operations
How can HSBC position itself to provide value in the microfinance space?
Cash/Liquidity Management• Collections• Receivables• Currency• Remittances• Cards
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Progress so far
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-100
0
100
200
300
400
500
600
2002 2003 2004 2005 2006 2007
Cum
ulat
ed p
ositiv
e an
d ne
gativ
e ne
ws
HSBCABN AMROBank of AmericaCitigroupBarclays BankJP Morgan ChaseWells FargoUBSRoyal Bank of CanadaCredit SuisseRoyal Bank of ScotlandWachovia CorpSociete GeneraleBNP ParibasDeutsche BankLloyds TSBNational Australia BankHBOS PLCMerrill LynchBanco SantanderFifth Third BancorpUS BancorpBBVAMitsubishi TokyoMorgan Stanley
Relative performance on sustainability
Cumulative instances of positive minus negative news
Source: Covalence EthiQuote 10 Banks 2002 - 2007
HSBCHSBC has pulled away from the pack
in the past 24 months
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48
Member of the Carbon Disclosure Leadership Index 2007
Top financial company in ethical business survey for 2007
2008: HSBC rated ‘top-bank’ by US Investor Coalition, Ceres for Governance and climate change
Awards and recognition…
The World’s First Carbon Neutral Bank
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PRESENTATION TO INVESTORS
Sustainabilityat HSBC
MARCH 2008