HSBC funding of Open Cast Mining

Photo Credit : Andi_Apple Flikr.com Nikon Gold winning photo depicting the Fimmersdorf power station and the open cast mining of Garzweiler

After their December announcement that HSBC would no longer be funding new oil and gas projects, the global banking giant has been called out for "making a secretive loan to a coal company " (Moulds 2023) in the sum of £340million.  The loan was made to German Energy company RWE, to expand their Garzweiler open cast mining operations.  RWE  are also responsible for bulldozing 13 villages and plan to evict the nearby village of Luzerath in their expansion plans for the 35Km2 mine.    In her article for the Bureau of Investigative Journalism, Moulds states that the deal was financed using sustainability loans.

The deal was initially structured as a sustainability-linked loan, meaning its terms include a commitment from RWE that it will hit certain climate targets by 2025. But the penalty it would face for failing to do so is a tiny increase in the interest it pays on the loan. This would come to $86,700 a year for a company whose most recent annual revenues were $26bn.
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Sustainability-linked loans are meant to encourage polluters to transition to more environmentally friendly operations, but companies that raise funds through the loans do not face any restrictions on how that money is used. ( Moulds 2023) 

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Apparently there are 25 other banks involved including Barclays and Santander.   

The type of coal mined at Garzweiler is lignite the dirtiest form of coal. In recognition that our carbon budget is nearly exhausted with the serious threat that poses to global temperature increases, fund managers have no exposure to companies who are involved thermal coal extraction and companies who generate electricity from burning thermal coal. 

There are no excuses for HSBC's shady behaviour which comes after they say that they have listened to climate scientists and after their television adverts were banned in the UK for greenwashing.   It has motivated Tony Lloyd the labour MP for Rochdale to table an early day motion calling on HSBC to stand by climate commitments and halt funding to organisations involved in the expansion of coal mining.   This has so far received support from five other MPs. 

​What we say : 

We would draw you attention to the reports from IPCC, Intergovernmental Panel on Climate Change and the International Energy Agency both of which state that more is being spent on fossil fuel exploration and extraction than on renewables.   These reports can be found in the Resources section. 
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The challenge in the current energy crisis is to fund renewable energy and speed up the process of bringing more  renewables energy on line not the funding short termism and not funding projects which take more carbon out of the ground, to be released into the atmosphere and potentially push our global temperatures to a place of no return. 

There are opportunities for ethical investors to participate in the just transition for a cleaner, greener and safer world and we continue to support clients who want to make sure their pensions and their savings are screened for fossil fuel exposure.  

As director of Big Picture Financial Planning we will be writing to our MP Sarah Dines to ask her reaction to the early day motion and encourage her to support it.  

Sources:

• Businessandhumanrights.org Germany: Energy company RWE demolishes village Lützerath for coal mining despite opposition from residents and climate activists  available online 
• BBC News :  HSBC to end new funding for oil and gas fields available online 
• Moulds J : 12th January 2023  HSBC’s secretive loan to a coal company bulldozing a village published  available online 
• Early Day Motion : 19th January 2023  HSBC and the Garzweiler Coal Mine available online