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BLOG: HSBC – the bank we hate to love

by Mark Gregory

Why HSBC’s decision to keep its headquarters in the UK might be good news for forest campaigners.

Deliberations within a global mega-bank on where it should locate its headquarters aren’t the kind of topic that would normally interest forest campaigners, let alone orang-utans or Sumatran tigers. 

But HSBC’s decision to stay put in Britain has significant implications for all these groups.

Over many years the bank has been a major source of finance for large-scale tropical agriculture projects, notably oil palm plantations in South-East Asia. These projects have been among the main drivers of tropical deforestation, leading to environmental destruction, social conflict and habitat loss for endangered species, like those orang-utans and tigers.

HSBC had been considering moving its home base away from London – most likely to Hong Kong - to escape the introduction of tougher British banking regulation in the wake of the global financial crisis.

 

Relief

However, in February, after months of internal pondering, HSBC announced it would remain in the UK after all.  The decision was a big relief to the British government; losing such a big player as HSBC could have threatened London’s status as a global financial hub.  

What has apparently gone unnoticed is that the decision was also good news for European forest campaigners.  

They may not like HSBC but while its base is in Europe they can at least engage it in discussions or target it effectively with campaigns.

Relocation to Asia held out the prospect that the bank would gradually become more remote from all forms of European influence, including that of forest activists.

That would be a serious loss, given HSBC’s global importance as a funder of potentially destructive agriculture.

 

Deforestation

Soon-to-be-published research by Fern suggests that, in the five years to 2015, the bank provided $4.8bn in loans and underwriting services to around 25 companies allegedly involved in land-grabbing. 

Our sample focused on major Asian companies engaged in palm oil production and operating in areas where deforestation is a concern. 

HSBC was by some margin the largest European provider of loans and underwriting for these companies.

We made no judgement on whether the allegations of land-grabbing were accurate or not.

But while HSBC has pumped funds into companies in high-risk areas, even campaigners recognise that its record is not all bad.

On paper, the bank has adopted unusually comprehensive policies to guide lending decisions relating to forestry and sustainability risks. 

The standards demanded of customers receiving finance include no deforestation, no clearing of high carbon value forests and free, prior and informed consent to planned projects from affected communities.

HSBC is the only bank to receive five stars – indicating the best policies - in the Forest 500, a widely cited benchmark of corporate commitments on deforestation.

 

Revamped procedures

However, campaigners have accused HSBC of failing to implement its forest policies properly. 

For example, a 2012 investigation by Global Witness found evidence that HSBC had ignored its own safeguards by continuing to lend money to Malaysian logging companies responsible for illegally stripping forests in Sarawak.

In response, HSBC revamped procedures and promised to improve.

So while the bank’s record is far from perfect, at least it has the right kind of policies in place and  gets embarrassed when confronted with credible evidence that it has failed to live up to its promises.

In a rapidly changing world, where financial power and influence over issues affecting forests is shifting to China and other places where European NGOs have little influence, that is worth a lot.

Environmental controversies probably played no part in HSBC’s thinking about whether to remain in Britain or not. Even so, campaigners have reasons to be reassured by the bank’s decision to stay.  

At a time when so much else is changing, at least one traditional bogeyman seems keen to stay within in reach and play by the established rules.

 

 

Images: Hakan Dahlstrom and Shankar S. via Flickr