HSBC starts climate-focused infrastructure finance unit

London — Britain’s HSBC has set up a new unit to tap deals in infrastructure finance and project finance linked to the world’s shift to a lower-carbon economy, and hired a former UK politician to lead it, a senior banking executive said.

HSBC Infrastructure Finance (HIF) will target a“meaningful share” of both in key markets, and incorporate parts of the bank’s Global Banking Real Asset Finance team, which includes infrastructure finance, export finance and portfolio management, a memo sent to staff by Greg Guyett, HSBC’s CEO of Global Banking & Markets, shows.

The unit, which will be headed by former UK government minister Danny Alexander, marks a return to ‘Project Finance Advisory’ for HSBC, which now only has a limited capability. HSBC hopes HIF will help grow the bank’s debt origination and distribution businesses, including by building new public and private sector partnerships.

The move comes as HSBC and other banks look to align their operations with a corporate commitment to reach net-zero emissions by mid-century, forcing a gradual tightening of lending to high-polluting sectors.

“HSBC has a leading presence in the regions where infrastructure financing and project finance advisory capabilities are critical to enabling a just transition to a low carbon economy,” Guyett said.

The global shift to a cleaner economy will cause trillions of dollars to be spent on building renewable energy and other assets to help cut carbon emissions, as well as adapting existing infrastructure to withstand the impacts of climate change.

Analysis by the OECD, World Bank and UN suggests annual investment of $6.9-trillion will be needed by 2030 to ensure infrastructure investment is on track to meet the world’s climate and sustainable development goals.

The new unit will work closely with the bank’s CMB Infrastructure Finance team, and oversee its Pentagreen Capital joint venture, a sustainable infrastructure debt unit launched with Singapore investment firm Temasek.

Alexander, a government minister until 2015 and current Asian Infrastructure Investment Bank (AIIB) vice-president for policy and strategy, will join HSBC in November and be based in London. He will sit on the Global Banking and Markets executive committee, reporting to Guyett. Until his arrival, HIF will be co-led by Alexi Chan and James Dynon.

Guyett said Alexander’s appointment would help accelerate efforts to partner with governments, multilateral development banks and companies, “including supporting the UK government’s new initiatives”.

AIIB president Jin Liqun said on Tuesday that Alexander, who joined the bank in 2016, had been “instrumental” in expanding the group’s membership and helping shape its strategic direction.

Reuters