In the drive to tackle the climate crisis, banks across Asia are keen to be recognized as going green. As a result, several of the region’s major lenders have backed away from future business with fossil-fuel-related industries.
However, more needs to be done in Asia where the environment faces a growing threat. Banks need to adopt and institutionalize a robust culture and best practice for environmental social and governance standards, while also incorporating sustainable and socially responsible investing.
The Asset reported on the rollout of a number of green bonds, and green and sustainability-linked loans during 2019. The number of these loans, which are based on a series of environmental, social and governance (ESG) performance metrics or have an interest rate pegged to sustainability performance targets, are growing.
Among this year’s newer ESG offerings, HSBC in Singapore recently introduced its Green Deposit Account. But apart from containing the key word green, what exactly does the new offering do?
The Asset spoke with David Koh, head of global liquidity & cash management, HSBC Singapore, to get a better understanding
TA: Is the HSBC Green Deposit Account an organic in-house creation from the bank?
David Koh: The HSBC Green Deposit Account has been launched in Singapore and the UK. These are the first green deposit accounts launched by the HSBC Group. It is an in-house creation designed in response to client demand for easily accessible ways to contribute to the ESG agenda. The account is available to Commercial Banking and Global Banking customers in Singapore.
TA : Does the new account have an investment threshold, a minimum deposit?
David Koh: The minimum balance is set in line with the underlying deposit type requirements. The maximum balance is set in line with currently available green lending. The customer will be informed of the maximum balance limit at the time of the product’s offering.
TA: Will it be rolled out in other Asian jurisdictions soon?
David Koh: We plan to launch HSBC Green Deposits products in further markets during 2020.
TA: By institutionalizing the green/sustainability offering, do you believe clients will make more commitments to this cause when they see tangible end results?
David Koh: Feedback from clients looking to embark on the sustainability path is that they’re often uncertain about how best to make a positive impact or unsure of the directions to take.
Recent advances in technology mean that treasuries now have numerous opportunities to make a positive environmental contribution towards their corporations' sustainability strategy. For example, adopting electronic transaction processing can drastically reduce the amount of paper used by both a treasury’s own corporation and the corporation's counterparties.
However, we are also hearing demand for simple cash management tools that can directly channel funds to sustainability-linked projects. This, we hear, is a clear way for corporates to contribute directly to the environment, and to do so in a manner that is simply integrated with their cash management systems. Yet, efficiency and transparency remain the hurdles.
The green account enables companies to apportion cash savings into projects that directly benefit the environment. Given that liquidity is critical for business operations, this is a simple and immediate solution for any corporate to begin or widen their sustainability strategy.
By providing a simple and familiar route, we hope that more businesses will take the step of contributing to the environment, and that, in time, we will see an uptick in the number of sustainability-linked projects.
TA: Does HSBC profile the corporate clients wishing to open green accounts to ensure that there is no conflict of interest with the green and sustainable actions?
David Koh: The deposits are available to all business, subject to standard customer due diligence requirements.
TA: Is there a dedicated team in Singapore or elsewhere that will manage the green/sustainability initiatives?
David Koh: HSBC Singapore’s Global Liquidity and Cash Management team will oversee the tracking and management of client funds. The funds will be deployed into projects that meet the bank’s established sustainability frameworks and internal processes that govern and apply to product development in the sustainability space.
TA: How quickly will clients see the results of the green account?
David Koh: We will make a reasonable effort to use 100% of deposits to finance green projects. For instance, when a green loan has been repaid, we will seek to redeploy the green deposits into other green assets as quickly as possible. While awaiting allocation, proceeds may be invested according to liquidity and funding management guidelines.
Clients will receive periodic reports from HSBC containing portfolio-level information regarding the use of the deposited funds in various categories of green financing, such as energy efficiency, clean transportation, green buildings, pollution prevention and control, renewable energy, etc. Any deposited funds awaiting allocation will be clearly identified in the report.
TA: Based on the experience from this account rollout, could you see a similar offering being produced for private banking clients?
David Koh: Recognition amongst stakeholders of the need to incorporate ESG into every-day practices is extending beyond corporates to include their suppliers. The result is smaller players, like many Singaporean family-owned businesses, need to adapt or they could face removal from the supply chain.
Green deposit accounts could be one route to beginning their journey. Although at this initial phase, the HSBC Green Deposit Accounts in Singapore are only offered to corporate clients.