Turning ambition into action: why finance is the catalyst for Asia’s net zero transition

Across the world, financial firms are setting sustainability and carbon neutrality targets as a top priority. It is now the norm across the industry to publish sustainability reports detailing targets and progress, not just for investors and regulators but also for other stakeholders the interested public more broadly.

However, it is crucial to acknowledge that financial firms’ sustainability goals are inextricably linked with those of their customers and clients. The financial services industry is, in fact, a facilitator of the wider corporate sector’s sustainability aspiration, as it provides capital to companies and solutions to investors that are transitioning towards more sustainable business models. Financial firms therefore have a responsibility to fund activities that serve clients’ sustainability goals, rather than detracting from them. In short, "Capital is critical to the transition process," said Jonathan Drew, Managing Director, ESG Solutions, Global Banking at HSBC. He was speaking at ReThink HK 2022, an annual conference on sustainable development for businesses across Hong Kong.

Countries across Asia are establishing net-zero targets of their own, yet they face the combined challenge of growing energy demands to fuel their developing economies, while also reducing emissions.

For Asia’s businesses to meet these accelerating targets, they must ensure their own sustainability strategies are ambitious, suitable to their business, and credible.

This is a tricky task, but can be broken down into:

1. Ambition: Is the company challenging itself?
2. Plan: Is it clear, and focussed on material issues?
3. Actions: What has done to date to demonstrate credibility?
4. Disclosure: Does disclosure explain the plan and progress made using relevant metrics?

With a clear plan assessment framework, any company can check the feasibility of its targets. Although steps 1, 2 and 3 may appear to be enough to finish the task, disclosure has a much-deserved place in the framework. Without it, it is easy to be sceptical about whether a company will really make progress. "A plan or commitment on their own doesn't mean much - one has to assess how credible the plan is,” said Jonathan. “And a good way to do this is by looking at the actions taken to date." By periodically disclosing past progress, and the fulfilment of goals set previously, companies strengthen their credibility over time and generate trust. Of course, disclosure must be relevant, accurate and timely and be authentic to avoid greenwashing.¹

Asia Pacific company sustainability reporting rates (2011-2022)

As a trusted partner, HSBC seeks to help and support its clients to develop and implement their net zero plans using the above framework. HSBC then engages regularly on progress.  This is a collaborative process so in tandem, the bank supports clients in taking action – not only in the form of guidance and advice, but also by committing funds and taking on some exposure. This kind of assistance matters, according to Thomas Elliott, Managing Director, Head of Client Coverage, Commercial Banking at HSBC. "We've got to recognise that taking risks and providing capital is one of our key responsibilities,” said Thomas, who also spoke at the ReThink HK conference.

After all, today’s commercial reality, reinforced by proliferating ESG regulation, is that it is becoming increasingly difficult for companies to access capital without a robust and clear sustainability strategy. This in turn makes it significantly more challenging for HSBC to support companies without climate action plans.

Along with supporting clients in their climate ambitions,² the financial industry increasingly recognises the importance of investing resources and establishing partnerships in sustainable projects across a broad range of industrial sectors.

For its part, HSBC funds numerous green initiatives across Asia, covering areas such as technology and infrastructure. In Singapore for example, HSBC partnered with state-owned investment company Temasek to establish a platform dedicated to funding marginally bankable sustainable infrastructure projects, which would otherwise have faced barriers to obtaining loans. This was launched in September 2021.³ The bank has also committed USD100 million towards philanthropist Bill Gates’ Breakthrough Energy venture, with a focus on scaling up energy transitions in Asia.⁴

In addition to its partnerships, HSBC prioritises ongoing public engagement through its membership of numerous regional and global taskforces and industry forums,⁵ and in 2021 joined the Net Zero Asset Managers Initiative and the Task Force for Nature Related Financial Disclosures.⁶ These present opportunities to influence the progress of broad-based sustainability initiatives.

Furthermore, learning from other regions’ practices is key to enhancing Asia’s sustainable development. Asia has much to learn from what is happening in other regions but Asia should also be ready to share its ideas with others. The Common Ground Taxonomy is an excellent example of this. According to Jonathan, "sound regulation will drive more robust, resilient, and inclusive business." Ultimately, collaboration between all stakeholders on sustainability issues is positive for business.

As the drivers of sustainable business, the financial sector recognises its fundamental role in the green transition – through providing advisory and capital, and taking risks in service of an urgent global cause. After all, as Thomas notes, "transition to net zero is one of the most fundamental, multigenerational, life-changing things we will all witness in the years ahead."

Today, we and many of our customers contribute to greenhouse gas emissions. We have a strategy to reduce our own emissions and to help our customers reduce theirs. Find out more about our climate strategy.