HSBC’s coal power policy, released at its April 2018 AGM, boldly states it will not finance new coal-fired power plants, with some exceptions. It will still finance projects in Bangladesh, Vietnam and Indonesia, with further limits on the carbon intensity and financial close dates of the projects.
The countries HSBC chose to exempt coincidentally have some of the largest pipelines of new coal power projects in the world. The Global Coal Plant Tracker identifies 36 Gigawatts (GW) of coal power under development in Vietnam, 21 GW in Indonesia and 19 GW in Bangladesh. HSBC recognises CO2 emissions have to be limited in order to meet the goals of the Paris agreement. What HSBC doesn’t talk about is that to achieve the Paris goals, no more new carbon emitting infrastructure can be built. In fact, 20% of the global coal power fleet has to be retired early. HSBC’s policy also does not even broach the subject of financing to existing coal power projects or infrastructure, such as rail or ports, that directly supports coal power projects.
In other words, it’s business as usual for HSBC on coal and here’s what that looks like in action.
Refinancing Vietnamese polluting coal project
HSBC was reported in January 2019 to be acting as a financial advisor on the proposed refinancing of debt for the Mong Duong 2 power station in Vietnam, a deal that would double the amount of debt extended to the project.
Mong Duong 2, a subcritical power station, became operational in 2015. Its lifetime CO2 emissions are anticipated to be 190.4 million tonnes. So while HSBC’s coal policy doesn’t prevent them from refinancing existing projects, they can support Mong Duong 2, which is likely to emit the most CO2 of any operating plant in Vietnam during its lifetime.
Expanding Bangladesh port to allow more coal imports
In Bangladesh, HSBC led a consortium of banks financing the Payra Port dredging in January 2019. The port is being expanded to allow larger ships to carry coal (and other materials). Twenty million metric tonnes of coal will be imported every year through the port to be used in the five coal power plants to be constructed in the area. These coal plants have also raised human rights concerns, notably around land being grabbed without compensation, and farming and fishing livelihoods being impacted.
Little impact on HSBC’s coal lending
These two projects are examples of how HSBC’s policy has had minimal impact on its lending, and can have grave impacts on the global chances of mitigating climate change.
Ironically, both Vietnam and Bangladesh are highly vulnerable to the flooding and sea level rise associated with climate change. Both countries are pursuing renewable energy plans. Vietnam’s policies have lead to a flurry of projects being announced in the past 18 months. Bangladesh, on the other hand, needs to attract more private sector finance to its renewable energy projects.
HSBC must stop funding coal power in these countries, honouring the spirit of its pledge to combat climate change. It must seek to assist the renewables sector to grow, rather than creating policies which allow coal power to flourish.