CSR in Banking: HSBC Steps Beyond the Equator Principles

What does CSR mean to HSBC, the world's largest bank?  This was my lunchtime conversation topic on Wednesday of last week's Ceres conference, where I sat down with Sharon Walck, SVP for Corporate Sustainability for HSBC North America, to talk about her company's sustainability program.

Before talking about what HSBC is doing to distinguish itself from its peers, it is worth clarifying that there is in fact already a baseline for CSR within the company's peer-group.  In 2003, ten major banks (ABN AMRO, Barclays, Citigroup, Credit Lyonnais, Credit Suisse First Boston, HVB Group, Rabobank, Royal Bank of Scotland, WestLB, and Westpac) joined together to sign the Equator Principles, a voluntary set of standards for financing projects with capital costs of more than $10 million.   Named to reflect an ideal of developing standards equally applicable to banks in the Northern and Southern Hemispheres, the Equator Principles commit signatories to reducing, mitigating, and/or compensating appropriately for damage to communities and the environment caused through financing of projects.  While the original motivation for creating the principles was pressure from the activist group Rainforest Action Network, signatories now view adoption of the Equator Principles as an opportunity to earn CSR credit for sound management of credit and reputation risk (note that while some consider this to be smart sustainability strategy, others perceive it as greenwashing).

One criticism of the Equator Principles is that they apply exclusively to project finance, which makes it notable that HSBC has adopted its own set of broader policies for responsible banking.  Since 2004, the bank has rolled out lending standards for forestry, chemicals, freshwater, mining, energy, and defense equipment, each developed with the intention of helping the company manage its exposure to sustainability risk.  To name a few examples: no illegal logging, no operations in UNESCO World Heritage Sites, no financing of companies involved in the production of chemical weapons, and "a restricted appetite for financing uranium for the power sector where IAEA standards are not met."

As this last phrase suggests, a closer look at these guidelines begs another question: are all of these guidelines unique to HSBC?  For certain, some fall into that sweet spot where CSR meets sound management of sustainability risks, which would mean that any other responsible bank should be maintaining comparable standards.  But how many of the stated guidelines are simply areas where the company is seeking to gain brownie points for complying with legal requirements?  And, to take the question a step further, in situations where legal compliance is no simple feat, do companies like HSBC deserve to be cut some slack for framing aspects of compliance as good CSR?

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