JP Morgan and HSBC Align with the Paris Agreement: Will All Big Banks Follow?

In the United States banking and investment world, socially responsible investing has always been greeted with skepticism and apathy. While some companies have paid lip service to it, investment flows and banking policies have not followed the hype. In contrast, European institutional investors are early adopters to investment policies and corporate governance when it comes to environmental concerns. Last week, global banking powerhouse HSBC announced a major commitment to aligning its financial policies with the Paris Agreement and set an ambitious target of net zero carbon emissions within a decade.

American bankers may wonder why the Paris Agreement, developed by the United Nations to combat climate change, would be part of a bank’s policy, even if it might develop and/or sell investment products that could be of interest in the ESG sector. Will HSBC’s pledge that its carbon emissions of clients and projects financed by HSBC be at net zero by 2050 pay off or will clients go elsewhere? The bet the bank is making is that it will actually attract and support clients with $750 Billion or more of financing in the transition to low carbon.

Noel Quinn, the head of HSBC explained, “HSBC has long been committed to opening up opportunities for our customers and the communities we serve. As we enter a pivotal decade of change, we have a landmark opportunity to accelerate our efforts to build a healthier, more resilient and more sustainable future. Our net zero ambition represents a material step up in our support for customers as we collectively work towards building a thriving low carbon economy.”

The announcement followed a similar announcement earlier last week by JP Morgan that mentioned a pledge regarding its financing activities as well as being carbon neutral in its own operation by 2021. In the United States, money flow into investment funds have yet to follow the trends in Europe but many banking institutions are convinced it will happen. HSBC has created a $100 million venture debt fund for CleanTech innovation. The announcement followed the formation of a joint venture earlier this year with Pollination Group Holdings focused on climate change called HSBC Pollination Climate Asset Management.

Financial institutions are not only responding to large institutional clients expressing interest in aligning investments with environmental concerns, but also a growing interest from a new generation of retail investors in North America.