The UK Advertising Standards Authority (ASA) has upheld complaints about two HSBC adverts displayed in 2021. The ads highlighted HSBC’s action on climate change, but failed to acknowledge the bank’s contributions to climate change through the financing of emissions-intensive industry.
- A complaint about ‘misleading’ adverts from HSB has been upheld by the ASA.
- The ruling did not say that HSBC was deliberating misrepresenting itself, but that is must acknowledge its contribution to the problem.
- As litigation increases against fossil fuels and plastics companies on pollution, could the financial industry that facilitates them be considered liable?
The ASA received 45 complaints, including from Adfree Cities, who challenged whether the two ads in question (highlighting HBSC’s work in financing transition and planting trees to store carbon) were misleading, because they omitted significant information about HSBC’s contribution to carbon dioxide and greenhouse gas emissions.
The complaint was upheld because the CAP Code required that the basis of environmental claims must be clear and that unqualified claims could mislead if they omit significant information. The ASA statement said that language used suggested that HSBC was making, and intended to make, a positive overall environmental contribution as a company.
In its ruling, the ASA instructed HSBC UK Bank plc to ensure that, “future marketing communications featuring environmental claims were adequately qualified and did not omit material information about its contribution to carbon dioxide and greenhouse gas emissions.”
HSBC, its transition defence and pushback from the ASA
Central to the challenge to the ads was the fact that while HSBC may well be making positive contributions towards action on climate change, its ongoing financings of carbon-intensive industries undermines that positive benefit and must be acknowledged.
HSBC’s argument is that while there is a clear need to transition to net zero, there is a need for a range of industries during the process of transition. It argued that the financing of greenhouse gas-emitting industries was required during the transition to net zero, and so their continued financing of those industries was not in conflict with the aims of a transition to net zero.
HSBC said their Climate Strategy was consistent with science based targets, including their 2030 financed emissions reduction targets for high-emitting sectors. They explained that their policies for phasing-down fossil fuel financing were also aligned with the recommendations of the Glasgow Financial Alliance for Net Zero (GFANZ), the UN Principles for Responsible Investment, and the International Energy Agency (IEA).
In terms of the ads specifically, they were described as highlighting two tangible and specific short-to-medium term initiatives, capable of quantifiable measurement, and the bank said they would not have been seen as commenting, in a broader sense, on their green credentials or environmental contribution. The call to action from the ads was to connect with HSBC’s website, where consumers could find detailed information on HSBC’s climate action contributions.
HSBC also argued that as the ads were displayed in the run-up to COP26 and the associated blitz of media coverage and discussion of climate change, that the audience would be knowledgeable enough to understand that they were about specific actions.
In its statement the ASA said: “We did not consider that meant that consumers would understand the intricacies of transitioning to net zero, and would not expect that HSBC, in making unqualified claims about its environmentally beneficial work, would also be simultaneously involved in the financing of businesses which made significant contributions to carbon dioxide and other greenhouse gas emissions and would continue to do so for many years into the future.”
Finance and the net zero transition
The Intergovernmental Panel on Climate Change (IPCC)’s Sixth Assessment Report stated that to avoid the most significant effects of climate change, and to have any chance of limiting global temperature rise to 1.5°C, global greenhouse gas emissions must be halved by 2030, and net-zero emissions must be achieved by 2050. The United Nations (UN) is encouraging countries to set short-term interim 2030 targets ahead of 2050.
A report by the Science Based Targets Initiative (SBTi) outlined that financial institutions needed to align financing with a 1.5°C net zero by 2050 pathway and set interim 2030 targets.
The IEA’s 2021 report on net zero by 2050 outlined that at that stage the world would still need 20% of current natural gas production, and 25% of current oil production. The mainstream perspective is that fossil fuels will continue to play a critical role in a secure energy transition up to 2050 and would therefore require financing.
HSBC’s transition plan
HSBC has said that, in terms of its relationship with the fossil fuel sector, it prefers a phase-down and industry engagement rather than divestment, an approach that had been drawn from the UN’s Principles for Responsible Investment.
The SBTi also recommends engagement with fossil fuel companies to adopt net zero targets and action plans, with divestment as a final resort for companies that were unable, or unwilling, to provide a credible transition pathway by 2040.
As a business, HSBC has targeted a 34% reduction in absolute oil and gas financed emissions, and a 75% reduction in financed emissions intensity for the power and utilities sector by 2030. In 2022 the bank plans extend their financed emissions analysis and targets to coal mining, aluminium, cement, iron and steel, and transport, and in 2023 they planned to report on the agriculture, commercial and real estate sectors.
There is also a plan to phase-out their financing of thermal coal by 2030 in the European Union and Organisation for Economic Co-operation and Development (OECD) countries, and by 2040 in the rest of the world. HSBC said that aim is consistent with the IEA’s report and the UN’s guidance in the area.
HSBC’s current emissions impact
HSBC’s Annual Report indicates that the bank currently plans to invest between $750 billion and $1 trillion in helping its clients transitioning to net zero.
The same report however also indicated that its current financed emissions – emissions related to the customers it financed – stood at the equivalent of around 65.3 million tonnes of carbon dioxide per year for oil and gas alone based on the information available at the time the report had been prepared.
This figure is likely to be much higher once other carbon-intensive industries such as power and utilities, construction, transport, and coal mining have been analysed and included. It was also clear that HSBC intended to continue funding thermal coal mining and power production in emerging markets, even if it plans to halt such investment within the OECD from 2030.