The British institution has been publicly vilified for its oil lending activities. Still, a Swiss pioneer impact investment company fund sees no problem with the bank's own bonds, research by finews.com indicates.

HSBC is one of the founding members of the Net-Zero Banking Alliance (NZBA). The UN-convened, industry-led alliance counts Switzerland's largest bank, UBS, and Raiffeisen, as members. As stated on its website, it is a group of leading global banks committed to financing «ambitious climate action» that transitions the real economy to net-zero gas emissions by 2050.

But HSBC itself may have a way to go until it gets there, given the «Banking on Climate Chaos» report and articles in the UK media, as exemplified by «Guardian». According to their take, the British-based institution is one of the world's largest lenders to the fossil fuels industry.

Necessary for Change

The «Guardian» doesn't stop at mentioning them, saying other European banks are also profiting from oil and gas loans. That list includes Deutsche Bank, Barclays, Crédit Agricole and BNP Paribas. According to the newspaper, they have committed about 1 trillion euros in lending since the Paris Agreement in 2016.  For its part, HSBC alone has lent about 423 billion euros.

The bank did respond to the Guardian by maintaining that the International Energy Agency (IEA) believes investments in oil and gas are important as part of the effort to transition to a climate-neutral economy.

Largest Fund Position

HSBC ostensibly doesn't see any contradictions between its climate promises and the business it is doing in oil and gas, and professional investors also appear to be on the same line when it comes to investing in their securities.

That also seems to hold true for Zurich-based asset manager Responsability, largely regarded locally as one of the first pioneers in microfinance and impact investment. Above and beyond that, it also holds the asset management mandate for the Swiss Investment Fund for Emerging Markets (Sifem), the government's microfinance and impact fund.

Bring on «Dark Green»

Research shows that HSBC bonds are, at 1.43 percent of assets, the largest position in Responsability's Transition to Net Zero Fund. In its marketing materials, it indicates that the fund's policy is to invest in companies that are leading their specific industry when it comes to decarbonization.

That fund, and all other Responsability funds, are classified under Article 9 of the EU's Sustainable Finance Disclosures Regulation (SFDR) and subject to strict criteria, which is why it can classify itself as «dark green», as the manager itself maintains on its website. Still, its holdings of HSBC bonds do raise questions, particularly given the harsh criticism by environmental activists and the media.

Showing Progress

A Responsability spokesperson said the objective of a fund, such as Transition to Net Zero one, is to allocate capital to companies that are actively involved in an «emissions trajectory» aligned with the Paris Agreement.

«These companies must maintain transparency concerning their emissions, pledge credible commitments, and demonstrate tangible progress towards the aforementioned goals via interim targets», the spokesperson continued, adding: «The fund's classification as article 9 under SFDR focuses on predefined sustainability objectives measured with specific sustainability indicators.»

Greenwashing Accusations

Meeting requirements on paper is one thing while the external perceptions of a fund's investments are another. Nowadays, everyone is quick to accuse others of greenwashing when it comes to sustainability investments, and the regulators have become quite sensitive to such matters

The Swiss government itself is delving into the matter after it had let the sector largely regulate itself and it is likely that it will draft a set of minimum requirements for these kinds of investments.

Last Stop Disposal

The issue is likely to continue to be of great sensitivity to an asset manager such as Responsability. According to them, they are making significant efforts to prevent greenwashing. They follow a rigorous impact assessment and ongoing monitoring process for companies in their portfolios and this could lead to divestments if they fail to meet pre-defined sustainability principles or breach SFDR principles.

«We appreciate stakeholder awareness when it comes to sustainability concerns,», the spokesperson indicated.

Investment Inflows

Any kind of trouble from stakeholders comes at a bad time for the asset manager. Responsability has had a difficult environment to contend with in recent years. For a while, it was up for sale, and had to let go of a number of employees. At the start of 2022, UK-based competitor M&G bought a majority stake. Under its new owner, it is trying to align its growth potential despite M&G's cost savings program.

According to them, things seem to be working out for now. In the first half of 2023, assets under management grew to $4.7 billion from $3.5 billion a year earlier. The Transition to Net Zero fund itself, which is in its first year of existence, was able to attract more than $100 million from a broad base of investors.

Now, all it has to do is make that trend sustainable.