Sustainable development at HSBC
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Transcript of Sustainable development at HSBC
Sustainable Development at HSBC
Presentation to InvestorsBest of BritishTuesday 28th November 2006
Agenda
• Overview of HSBC and Strategy• HSBC’s approach to sustainability
• Key themes• Structure and governance• Risk management• Business development
• Climate Change• Microfinance• Progress so far• Q&A
Overview of HSBC and Strategy
Fundamental strategic thinking
A bank is a ‘leveraged’ play on the underlying economy; therefore the key challenge is to:• Select the better performing economies• Attract the most valuable clients in our chosen economies
HSBC aims to produce a blend of earnings from:• Developed mature-growth economies• Developing higher-growth economies (considered on a risk-adjusted basis)
Leveraging our internationality provides revenue generating and cost saving opportunities• Leveraging through our local presence the increasing trade and other links
between developed and developing economies• Transferring skills and best practice• Managing resources globally
Segmentation of customer groups
• 3,800 customer relationships
Corporate, Investment Banking and Markets (CIBM)
• Some 90,000 complex, wealthy clients with US$1m of liquid, investible assets
Group Private Banking (GPB)
• 3,800 customer relationships
Corporate, Investment Banking and Markets (CIBM)
• 3,800 customer relationships
Corporate, Investment Banking and Markets (CIBM)
• Some 90,000 complex, wealthy clients with US$1m of liquid, investible assets
Group Private Banking (GPB)
• Some 90,000 complex, wealthy clients with US$1m of liquid, investible assets
Group Private Banking (GPB)
• Including HSBC Premier
• Some 50m customers
Personal Financial Services (PFS)
• Some 60m customers
Consumer Finance (CF)
• Including Small & Medium-sized Enterprises (SMEs) and Middle Market Enterprises (MMEs)
• Some 2.5m customers
Commercial Banking (CMB)
• Including HSBC Premier
• Some 50m customers
Personal Financial Services (PFS)
• Including HSBC Premier
• Some 50m customers
Personal Financial Services (PFS)
• Some 60m customers
Consumer Finance (CF)
• Some 60m customers
Consumer Finance (CF)
• Including Small & Medium-sized Enterprises (SMEs) and Middle Market Enterprises (MMEs)
• Some 2.5m customers
Commercial Banking (CMB)
• Including Small & Medium-sized Enterprises (SMEs) and Middle Market Enterprises (MMEs)
• Some 2.5m customers
Commercial Banking (CMB)
HSBC’s ‘Broadbrush’ 25-year scenario
Key economic areas will be:• NAFTA led by USA• China
50% of the increase in world demand will come from developing countries:
• China, India, Mexico and Brazil
Major opportunities within the diaspora of:• Chinese, Hispanic, Indian and many other expatriate communities
HSBC’s global distribution and advantage
International network - 76 countries and territories - 9,500 offices
Tegucigalpa
Bogotá
SanSalvador
San Jose
Managua
To be added with Grupo Banistmo S.A.
Key
Key Sustainability Themes
What are our aspirations?
• Bronze - compliance, middle of the pack, no serious mistakes, doing
doing the minimum, we deal with our own environmental impact.
• Silver - sectoral leadership, leadership in dealing with specific issues,
issues, we stand out from the crowd, we make a difference beyond
beyond our suppliers and customers.
• Gold - we aspire to change our operating context, we think way
beyond compliance and make bold decisions about creating business
business opportunities as a leader. Sustainability is brand.
How “Sustainable”…….?
Environmental responsibility
Economic responsibility
Social responsibility
SUSTAINABLE DEVELOPMENT
Our sustainable development strategy
CLIMATECHANGE
WATER
BIODIVERSITY
POVERTY
RISK
MA
NA
GE
ME
NT
BU
SINE
SS DE
VE
LO
PME
NT
OPE
RA
TIO
NS
PHIL
AN
TH
RO
PY
POLICIES
PROCESSES
CARBON
WATER
FORESTRY
MICROFINANCE
BUILDINGS
TRAVEL
SUPPLIERS
IT
ENVIRONMENT
EDUCATION
Structure & Governance
Group Sustainable Development
Group Sustainable Development Risk Management
•Policies•Processes•People
•Climate Change•Microfinance•Freshwater•Forestry
•Energy•Water, waste•CO2 emissions
Indirect Im
pact
Communications around Corporate
Responsibility
Advisor on the Environment
Business Development
Sustainable Development
Advisory Team
Direct
Impact
Indirect Im
pact
Move HSBC from a mistake avoidance mindset to one centred on opportunity
Risk Management
Sustainability Risk Management
Minimising the indirect impact of our lending lending
• Objectives:• Develops policies and processes to
ensure that the Group protects its reputation and brand from 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
Evolution of Sustainability Risk
Group Environmental Policy
Equator Principles
Environmental Risk Standard
Forest Sector Guideline
Pre-1997 1997-2001 2002 2003 2004 2005 2006
Environmental Risk Structure
Freshwater Guideline
Energy Guideline
Metals & Mining Guideline
Sustainability Toolkit
Environmental Risk Clearance
Reporting
COMPLIANCE
VALUE ADDED
Advisor on the Environment
Environmental Risk Unit
Training & CommunicationCompleted
Corporate “Culture”
Member Banks’ Policies
In Progress
Chemicals Guideline
Sector Guidelines
FOREST LAND & FOREST PRODUCTS
FRESHWATER INFRASTRUCTURE
ENERGY
METALS & MINING
CHEMICALS
TIM
E
RISK
Functional Management of Environmental Risk
Jon WilliamsHead of Group Sustainable
DevelopmentGHQ GSD
Berthold MutschmannDeputy Head of
CreditGermany (HTDE)
Louie HacheyAssistant Vice President
CreditCanada (HBCA)
Charles SavageDirecteur Adjoint des Risques
de MarchésFrance (HBFR)
David Gay (CMB)/Kevin Hutchings/Richard
Martin (CIBM)Credit & Risk Management
UK & Europe (HBEU)
Sidney WangCorporate Credit
ManagerSouth America (HBBR)
Lloyd MaddockSenior Manager Corporate
Credit & RiskMiddle East (HBME)
Ruben ChavezDirector Credit Portfolio
ManagementMexico (HBMX)
Patrick K T IpChief Credit Officer
(HASE)
Eric Dettmar/Sharon WalckCredit Risk Management
USA (HBUS)
Paul NortonSenior Manager Credit & Risk
Asia Pacific (HBAP)
Sustainable Business Development
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
Carbon Water
Forestry Micro
Custom
er groups
Product groups
Countries
Climate Change
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.”
(Stephen Green, Group Chairman, HSBC Holdings plc May 2006)
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 cleanerenergy.
Climate Change: The Business Forecast...
• Climate change is happening and is urgent
• Our 125 million customers around the world will be affected by affected by climate change
• We need to support them in managing climate risks
• We can finance the shift to low carbon technologies
• Climate change can be tackled without damaging economic economic prospects
• There is a wide range of options for reducing emissions
Managing our Footprint…...
BUY RENEWABLESREDUCE
OFFSET
CREDIBLEADDITIONAL
COST EFFECTIVE
HSBC is the world’s first carbon neutral bank
We have 705,000t CO2e to manage….
Electricity74%
Air10%
Road7%
Gas (Mains)
7%
Other sources
2%
Group carbon dioxide emissions - 2005
Energy Savings = Cost Savings
Emissions ReductionTarget:
5% reduction over 3 years from 2004
Managing our Indirect Impacts….
14
7
Billion of Tons of Carbon Emitted per Year
0
Currently
projected
path
Flat path
Historicalemissions
1.9
14 GtC/y
7 GtC/y
Seven “wedges”
205520051955 2105
Our Areas of Focus….
Wind, Solar PV
Biofuels
Energy and Transport Efficiency
Fuel Switching
Carbon Capture & Storage
Landfill Gas/Methane Capture
Geothermal
Nuclear, Hydrogen
Microfinance
Microfinance - what is it?• Microcredit is the provision of small loans to the
unbanked - loans of typically less than $200 - to indiviudals (usually women) to establish or a small self-sustaining business - a
• 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.
• The players:
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
Donors and Commercial Funding
Microfinance Enablers e.g Accion
Local Affiliates e.g. Compartamos
End clients
HSBC’s current involvement
• HSBC is currently engaged with Microfinance institutions 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
Our Microfinance Experience and Strategy
Presently Active:IndiaMexicoPhilippines Russia Sri LankaUSA
Priority countries:• Argentina• Brazil• China• Turkey
Next steps...• Bangladesh• Egypt• Indonesia• Pakistan• Poland • Thailand
Countries with current microfinance activitiesPriority countries to be involved
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.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
Progress so far
Relative performance on sustainability
Cumulative instances of positive minus negative newsSource: Covalence EthiQuote 10 Banks 2001 - 2006
HSBC has pulled away from the pack in the past 24 months
We are making progress…..
• Fortune Global 500 Accountability Rating: up from 43rd to 4th now
leading financial institution
• F&C Asset Management - “HSBC makes a move” “...real progress in
the company's management and disclosure of environmental credit
risk….and improvements in how environmental risks are integrated
into the bank's day-to-day lending decisions”
• Both Henderson & Morley have added us to their SRI Funds. HSBC
is now rated A by Innovest, an ethical rating agency, up from BBB.
• First place in the Low Carbon Finance and Investment Leaders
category of a survey by BusinessWeek and The Climate Group
Sustainable Bank of the Year 2006
Ranked No 1Climate
Leadership Index, Banks
Recognition of progress
Sustainable Development at HSBC
Presentation to InvestorsBest of BritishTuesday 28th November 2006