The Financial Times, describing the move as a “symbolic step”, noted estimates that the decision would affect just four per cent of its fossil fuel-related financing globally. However, it is just part of the bank’s response to a major shareholder revolt last year, in which a $2.4 trillion coalition of investors called for a reduction in lending to the oil-and-gas industry in line with the emission-reduction targets in the Paris Agreement on climate change.
And, as environmental campaigners pointed out, the decision sends a “strong signal to fossil fuel giants and governments” that global financiers are beginning to turn away from oil and gas, not to mention coal.
So, regardless of whether politicians like it or not, market forces are increasingly responding to the undoubted and obvious direction of travel towards a net-zero economy. The key players are not passionate but unrealistic Green activists, but pragmatic and serious business people whose primary job is to make money for their clients.
HSBC is not abandoning oil and gas, and nor should they. Instead they are beginning a managed transition towards a world in which electricity, derived from renewables and nuclear, becomes our main power source.
Given the world as a whole is not moving quickly enough, it is unlikely that the bank is. However, a slow pace now means that we will need to sprint all the faster in the future. As the signs of climate change become harder to ignore, with increasingly severe droughts, heatwaves and storms, support for action will grow.
Failing to make sufficient progress risks reaching a point where there is a mass panic among the public and investors. Capital flight from oil and gas could leave some with vast fossil fuel assets they cannot sell. Such a scenario may seem far off, but it is advancing steadily over the horizon.
Sensible politicians and businesses alike should be working to avoid such a chaotic vision of the future, with all the profound and potentially dangerous consequences for society that it would entail.