Posted on: May 23rd, 2022
There is so much to say on this story, but let me start by saying I have no desire to ‘bash’ HSBC.
Big banks are imperfect and have, in my view, propped up the fossil fuel industry for far too long – but that is not what I want to focus on here.
My focus is on the comments made by Stuart Kirk, HSBC’s global head of responsible investing – at last weeks’ FT Moral Money conference – where he said that climate change is not a risk investors should worry about.
His speech, entitled ‘Why investors need not worry about climate risk’ was in my view ill judged, about ten years late and unfair on his colleagues (some of whom he referred to as ‘wonks’) – and it put the HSBC c-suite in a horrid position.
Needless to say, I disagree with this view – and his opinion that climate risk is now an issue because central bankers because they have too much time on their hands!
So, to take this from the top – when I asked about this by journalists last week I was pretty cautious as I had not seen the speech (I now have, you can watch it via the link below). I agreed it sounded like a pretty serious problem for HSBC and could impact their business. But I am also cautious about making assumptions or shutting down debate. Mr Kirk is entitled to his views – and I agreed with some of them.
However, from the first journalist’s request it was immediately clear to me that something had gone very wrong. A senior HSBC executive, their head of global RI (Responsible Investment) no less, was accusing central bankers (he singled out to Mark Carney multiple times), policy makers and other event speakers of ‘overstating the financial risk of climate change’, ‘trying to out hyperbole the next guy’ and calling many others ‘nut jobs’ – for worrying about climate risk.
Having watched the presentation I can now see that the warning signs were there from the start.
Any good presenter starts by building bridges with warm words or a little joke – but his opening line was about how lovely it was to be ‘back at the FT’ as he ‘missed the place horrendously’ adding… ‘I now have a beard. My one sop to sustainable investing.’
Neither indicates that he takes his ‘current’ role particularly seriously.
Some of his quips were of course sensible – as you’d expect. Markets are indeed fickle, they do funny things in the short term – and climate change is not the only thing investors need to worry about – especially right now. Inflation, diving markets, the cost of living crisis etc all matter – but he seemed to somehow overlook the point that these are not on the same scale as severely disrupting weather patterns effectively permanently. Indeed his comments on ‘proportionality’ were entirely the wrong way round in my view. (I doubt his comments about the Netherlands and Florida will win him many friends either).
One of Mr Kirk’s core points was to bemoan the amount of time he has (or should I say had?) to spend working on climate change related tasks – which given his job and who he works for is pretty extraordinary.
Indeed his presentation conveniently missed a number of rather important factors, including:
And so it is this third point, the apparent mismatch between his comments and HSBCs positioning that was most worrying in many ways. It shouted ‘greenwash’.
When greenwash is intentional, which given the swift action of HSBC’s management is hopefully not the case here, it is often about trying to maintain the status quo. Either way, we are now is a big problem because we know the planet can not tolerate what we are currently putting it through.
I can not say whether or not Mr Kirk thinks like that. I do not know him. But if he really thought he could work in run a responsible investment team – in a major bank that makes a great deal of noise about its climate credentials – and not focus on climate risk, I’d be surprised.
Which this brings me back to the (somewhat Daily Mash style) title of this blog… which I hope hints at my incredulity.
Some of us have stuck our necks out to bring environmental and social issues into business and investment markets for many years – and bear the scars. As a result we are a pretty resilient ‘type’ – used to compromising and also generally optimistic.
I first became involved in the area in 1991. Climate really hit the scene in 1997 (at Kyoto), but for many years it was dangerous to use the words like ‘climate change’ and ‘global warming’. Other hugely important issues had to be used almost as ‘proxies’ to achieve the same aim (eg human rights concerns, pollution etc). Thankfully much has changed recently, due in no small part to the success of the Paris Agreement in 2015.
People who have come onboard since 2015 often do not have that perspective – and are often younger and better informed of course. I have long found observing ‘more experienced’ industry professionals who are ‘relative newcomers to ESG’ fascinating. Their reasons for getting involved vary – but briefly I see one group as being people who are pleased they can now come ‘out of the closet’ – and openly admit to caring about the planet and people. Another is those who now understand the science and realise inaction is not worth the risk. Others meanwhile tend to say the right things, but their hearts are not in it – even if their wallets are. They are towing the line.
The most irritating group by far – as with any difficult topic these days – are the keyboard warriors who hide behind pseudonyms (like the one who called me a ‘Nazi’ in an FT chat room yesterday – now removed). I take some comfort in hoping that my comments may have touched a nerve there – although it may have been a bot. Either way – except for when dealing with trolls – and time permitting, I am always happy to engage with people who have different points of view. That is often how we learn and develop, both individually and collectively.
If HSBC had not taken swift action and suspended Mr Kirk on Sunday evening they would have looked very much like they were ‘playing both sides’ – begrudgingly towing a line – rather than trying to deal with the imperfect situation they find themselves in as a big business. So I congratulate them for their swift action – even if their recruitment and compliance teams may have unresolved issues.
So, back to bandwagons. Hearing people refer to ‘ESG’ or the ‘sustainable investment community’ (note – they are similar but different) as ‘a bandwagon’ is somewhere between sad and infuriating for me, on multiple levels. However it is also a sign of the area’s success, and may help raise standards – so is not all bad.
But from an individual perspective – if someone thinks the area is a bandwagon why would they climb aboard? (Where are their scruples? And in Mr Kirk’ case, why didn’t he get a job doing something he was more comfortable with?) And once on the bandwagon – why would such a person criticise others for being on the same bandwagon!? (What about the implications?).
I suspect those who take the financial implications of climate risk seriously might have the last word this time (unless Mr Kirk returns to the FT…). If the area were nothing but a bandwagon we would be in real trouble.
The effect of his intervention will therefore almost certainly ensure companies like HSBC – and the regulators he mocked – are more careful – and more sceptical in future.
I doubt that was Mr Kirk’s intention. But as I have said – I may be wrong. After all, he did not deny that climate change was ‘an issue’, so maybe things are going to plan for him? Or maybe not.
There is a lot to digest in this story – and we have barely scratched the surface here.
One prediction I feel safe making however is that this will run for a while. His speech will caste a long shadow… yet however much I disagree with his views, it is right that they are heard, and debated.