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PRESENTATION TO SUSTAINABILITY & THE MEXICAN FINANCIAL SECTOR SEMINAR
S t i bl D l tSustainable Development Risks and Opportunities
OCTOBER 2007
A dAgenda
• Overview of HSBCOverview of HSBC• Why sustainable development is changing the finance
sectorCh i th t i bilit i th t tt• Choosing the sustainability issues that matter
• Managing the downside:– sustainability risk managementy g
• Capturing opportunities– sustainable business development
• Climate Change: Risk or Opportunity?• Climate Change: Risk or Opportunity?• What is next? The future of sustainable finance
Overview of HSBCOverview of HSBC
How we’ve changed
20061982
312,000 staff
M th 10 000 ffi
42,000 staff
A d 1 000 ffi More than 10,000 offices
83 countries and territories
Around 1,000 offices
54 countries and territories
Profits: US$22bnProfits: HK$2.4bn (US$390m)
Assets: US$1.9 trillion
Market Cap: US$200bn
Assets: HK$379bn (US$58bn)
Market Cap: US$2bnHK GAAPHK GAAP
We are a broad-based universal bank, with four strategic businesses
Personal Financial Consumer finance will remain aPersonal Financial Services
Consumer finance will remain a core competence
Commercial Banking International franchise and connectivity is a unique platform
Across all these businesses, we
will meet our customers’
Corporate Investment Banking and Markets
Emerging Markets-led and financing-focussed
customers protection,
investment and insurance needs
Private BankingPowerful international network and connectivity with the rest of the Group’s businessthe Group s business
We have a diversified growth platform2006 Profit before tax (US$22,086m)By Geography By Customer
Asia39%
Europe32% Corporate,
Investment
Private Banking
6%Other (-2%)
Banking and Markets
26%
Personal Financial Services
43%
NorthL ti A i North America
21%
Latin America8% Commercial
Banking27%
Why sustainable development is y pchanging the finance sector
May 2004
Wh d d hi ?Why do we want to do this….?
Wh d d hi ?Why do we want to do this…..?
R iReputationpRiskRiskRevenue
I ibl lIntangible value…..
….is hard to earn and easy to destroy!
Choosing the sustainability issues g ythat matter
H “ i bl ” ?How “sustainable”…….?
Environmental responsibility
SUSTAINABLE
Economic Social
SUSTAINABLE DEVELOPMENT
Economic responsibility
Social responsibility
Our Corporate Sustainability StrategyOur Corporate Sustainability StrategyEB FO C
CLIMATECHANGE
WASTE
EM
PLO
YE
E
BR
AN
D &
RISK
MA
BU
SINE
SS D
AD
VISO
R
OO
TPR
INT
CO
MM
S &
CO
MM
UN
IT
WATER
BIODIVERSITY
E E
NG
AG
E
& M
AR
KE
T
AN
AG
EM
E
DE
VE
LO
PM
RY
SER
VIC
T MA
NA
GE
& R
EPO
RT
TY
INV
EST
POVERTY
EM
EN
T
TIN
G
EN
T
ME
NT
CE
S
EM
EN
T
TIN
G
TM
EN
T
C S i biliCorporate Sustainability
Employee Ad i S iEmployee Engagement
Advisory Services
Direct ImpactFootprint Management
Group Corporate Risk Advisory
Management
Indirect Impactp p
SustainabilityBusiness
DevelopmentIndirect Impact
Brand & Marketing Communications
Community Investment
Philanthropy
g Communications & Reporting
Managing the downside:
Sustainability Risk Management
Sustainability risk management
Minimising the indirect impact of our lending
• Objectives:– Develops policies and
Peoplep p
processes to ensure that the Group protects its reputation and brand from environmental and reputational risk Processesp
– Ensures that these policies and processes are mainstreamed in the risk assessment and approval process through aapproval process through a programme of communication and training
Policies
Sustainability risk framework
Sustainability Risk StandardSustainability Risk Standard
Sustainability Risk PolicySustainability Risk Policy
Equator Principles Sector Policies
G idance Notes
Equator Principles Sector Policies
Guidance Notes
Sector guidelines
Energy
Metals and Mining
Energy
Chemicals
Freshwater infrastructure
TIME
Forest land and forest products
RISKRISK
Functional management of sustainability risk
Group Sustainable Development (GHQ GSD)
USA (HBUS)Eric Dettmer (Credit)
Asia Pacific (HBAP)Paul Norton( )
John LaidlowRichard Naughton
Canada (HBCA)Louie Hachey
UK & Europe (HBEU)
( )Sharon Walck (Policy)
Paul Norton
China (HBAP AOC)Pak Yue Hong
p ( )Roger Atkins (Credit Ops)
David Gay (CMB)Kevin Hutchings (CIBM)
Richard Martin (CRM)
Mexico (HBMX)Ruben ChavezCesarea MayaTeresa CaronErika Cano
Indonesia (HBAP IMO)Amol Titus
France (HBFR)Paul CollyerSouth America (HBBR)
Danish Qureshi
Argentina (HBAR)
Malaysia (HBMY)Wei Kwang Chong
Germany (HTDE)Berthold Mutschmann
Middle East (HBME)
Hang Seng (HASE)Patrick K T Ip
Argentina (HBAR)Moira Trigubo
Turkey (HBTR)Chile (HBCL)
José Toresano (Credit)Lloyd MaddockEsra Karslioğlu
( )Jorge Rogaler (CIB)
Overall risk assessment
A. HIGH RISK B. MEDIUM RISK C. LOW RISK NO RISK
4. NON-COMPLIANT
3. NEAR-COMPLIANT
2. COMPLIANT
1. LEADER
Capturing opportunities:
Sustainable Business Development
Sustainable business development
Capturing the opportunities Carbon Water
• Objectives– Focuses on key areas of business
development in:
Carbon Water
MicroForestryp– Climate change and low-carbon technology– Sustainable forestry– Water infrastructure
Microfinance– Microfinance
– Seeks to identify business development opportunities across all geographies, all customer groups, and all product groups
Custo
Prod Co
and support business units in capturing them; and to evaluate inbound business referrals
omer group
uct groups
ountries
ps s
Climate changeClimate change
Climate change matters...
We believe that climate change represents the largest single environmental challenge this century and thatsingle environmental challenge this century and that
financial institutions will play an important role in the shift to cleaner energy.
“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 technologyproud 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)
Climate change: the business forecast...
• Climate change is happening and is urgent
• Our 125 million customers around the world will be affected by climate change
W d t t th i i li t i k• We need to support them in managing climate risks
• We can finance the shift to low carbon technologies
Cli t h b t kl d ith t d i i• Climate change can be tackled without damaging economic prospects
• There is a wide range of options for reducing emissionsThere is a wide range of options for reducing emissions
Managing our footprint…
We have 813,000t CO2 to manage…
HSBC is the world’s first carbon neutral bank
REDUCEREDUCE
HSBC Mexico Headquarters The new US$150 million h d t b ildi i M i
BUY RENEWABLES
OFFSET
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
We continue to buy electricity from ‘green’ or renewable sources Currently, we purchase green elecrticity in the UK, the US, Australia Brazil Irelandheritage. 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
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 • Cost effectivegy
Managing our indirect impacts…
Billion of Tons of Carbon Emitted per YearEmitted per Year
14 14 GtC/y
Hi t i l
Seven ‘wedges’
7 Flat path
Historicalemissions 7 GtC/y
01.9
0205520051955 2105
Our areas of focus…
• Wind, Solar PV
• Biofuels
Energy and Transport Efficiency• Energy and Transport Efficiency
• Fuel Switching
• Carbon Capture & Storage
• Landfill Gas/Methane Capture• Landfill Gas/Methane Capture
• Geothermal
• Nuclear, Hydrogen
Climate change: The Stern review
“We have the time and knowledge to act, but only if we act internationally strongly and urgently”act internationally, strongly and urgently”
(Sir Nicholas Stern)
• CO2 emissions: reduce by 80% by 2100
T h i ll d i ll i bl l ti i t• Technically and commercially viable solutions exist
• Costs of doing so now: 1% of global GDP (USD184bn)
• Costs of doing nothing: 5-20% of global GDP by 2050
Climate change: The Stern review
Recommendations:
• A global emissions trading system
• The deployment of low carbon technologies and upscaling of related R&D
• International collective government action
Our perception of opportunity…
$9bn $63bn$9bnGlobal Equity Investment in Cl T h 2006
$63bnGlobal Renewable Energy I t t 2006CleanTech, 2006 Investment 2006
$2 000bn$2,000bnGlobal Carbon Markets,2012 (UNEP FI)2012 (UNEP FI)
E i i B S i ChilLow Emission Buses, Santiago, Chile
What next?
The future of sustainable finance
Relative performance on sustainability
HSBCHSBC has pulled away from the pack
HSBC
from the pack in the past 24 months
Cumulative instances of positive minus negative newsSource: Covalence EthiQuote 10 Banks 2001 - 2006
Cumulative instances of positive minus negative news
FT ‘Sustainable Bank of the Year’ 20062006
HSBC top financial companyHSBC top financial company in ethical business survey for 2006
HSBC - Winner of the Climate P t ti A d 2007
Carbon Disclosure Project 2006 HSBC tops Climate
Protection Award 2007
j pLeadership Index 2006
A ll d ?Are we all done?
We have made a good start….
….but there is plenty more to do!
O “2020” Vi iOur “2020” Vision• Sustainability risk management will be mainstream
Cli t i k ill b t th th t t th t• Climate risks will be a top three threat to the sector• Regulation and voluntary action will drive change• Climate change concerns will drive massive investmentClimate change concerns will drive massive investment
in environmental infrastructure • Environmental asset pricing will expand beyond carbon
R t il ill d d fi i l d t• Retail consumers will demand green financial products• The SRI community will be a major force for change• Transparent reporting will be the normTransparent reporting will be the norm • Brands that take a position will survive and prosper
PRESENTATION TO SUSTAINABILITY & THE MEXICAN FINANCIAL SECTOR SEMINAR
S t i bl D l tSustainable Development Risks and Opportunities
OCTOBER 2007