HSBC Canada Targets ‘Ripple’ ESG Demand with New Financial Products for Businesses

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Green deposits and loans linked to sustainability, trade finance and revolving credit facilities will be available to Canadian businesses of all sizes

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HSBC Bank Canada is launching a range of sustainability-related financial products for corporate clients, including the country’s first “green” deposits that will be used to fund environmental initiatives such as renewable energy and biodiversity conservation, and loans with interest rates linked to the achievement of ESG objectives.

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“We will be the first bank in Canada to apply sustainable finance market principles to our trading and deposit products,” said Linda Seymour, Managing Director of HSBC Bank Canada, in an interview with the Financial Post.

Green deposits and loans linked to sustainability, trade finance and revolving credit facilities will be available to Canadian businesses of all sizes.

The deposit accounts, which will offer overnight savings and term investment options in Canadian and US dollars, carry interest rates comparable to those of regular deposits. But green deposits will be eligible to fund loans for sustainability projects, and clients will receive a quarterly portfolio-level view of how their funds have been deployed.

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The interest rate on sustainability related loans will be reset every year and will decrease or increase depending on the achievement or failure of the sustainability measures.

What we have here is a runoff of expectations, which can be of concern for many companies.

Alan turner

Alan Turner, head of commercial banking services at HSBC Bank Canada, said that while the focus on environmental, social and governance (ESG) issues has focused on institutional investors and large companies with the means to ” printing green bonds and researching and investing in sustainable development, there is a ‘spillover effect’ for small and medium-sized businesses, especially those that are part of the supply chain of those that have become established. committed to reducing their carbon footprint.

“What we have here is a runoff of expectations, which can be of concern to many companies,” he said, adding that expectations can come not only from the supply chain but also client.

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Many small and medium-sized businesses believe that engaging in sustainability efforts would create “a competitive advantage”, but they have not been able to access it, he said.

Seymour said HSBC’s Canadian unit, based in London, is following trends in Europe, where banks are actively marketing products related to sustainability, including deposits intended for energy transition efforts.

“European markets… are a bit more mature and are looking at sustainability and climate. In Canada… we’re playing (a bit) catching up, ”she said. “So for us, we saw what our colleagues (were doing) and the experience we had on a global scale, and it was an opportunity for us to bring that to Canada. “

The range of new financial services products offered in Canada will help HSBC Bank Canada respond to “market orders” given by its parent company on the ESG front, executives said in a recent interview. HSBC is targeting between US $ 750 billion and US $ 1,000 billion in financing and investment for the energy transition on a global scale by 2030.

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The British bank has pledged in recent years to cut funding for new coal and oil sands projects. However, HSBC remains among Europe’s leading fossil fuel financiers and faced calls in the spring from a pension group and other institutional investors to step up its climate commitments.

In June, the Canadian Unity won a mandate from the Federal Department of Finance to design the framework for Canada’s Green Bonds alongside TD Securities. Banks have been selected to help develop the ongoing program and support the inaugural issue.

“They want to talk about the pandemic, but they also want to talk about how they can rebuild in a more sustainable way,” Seymour said. “And so, there was a real opportunity for us to take this knowledge that we had globally and bring it to the Canadian market. “

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Turner said new sustainability-related deposit, loan and finance products marketed to HSBC Bank Canada commercial bank customers create an opportunity for growth in this country, where it is the seventh largest bank with assets of $ 117.3 billion.

“It certainly does something positive… but we’re also a commercial animal so if we didn’t see value in that it would be harder to do,” he said.

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“When a company brings a product to market, you want that product to be successful and acceptance to be great, and we expect that to be what will happen with this suite of products. “

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Angie Hall, newly appointed Head of Sustainable Finance at HSBC Bank Canada, said there is clear interest in products related to sustainability, based on conversations with Canadian companies on ESG over the past 18 years. last few months or so.

The bank is about to announce its first green deposit, she said, and there is demand for a broad deployment of a lending product that “ties ESG commitments to the cost of capital,” based on performance against annual targets for items such as the greenhouse effect. reduced gas emissions, increased use of renewable energies, greater diversion of waste from landfills, reduced water consumption and social and governance measures such as increased diversity of the workforce.

“(We) expect a lot more momentum to develop within the commercial banking space,” she said.

“I think the motivations vary from customer to customer, but… it all comes down to stakeholder engagement and the credibility of the product line, and that’s another tool they can use. and demonstrate… their sustainability commitments and their particular areas of focus. “

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