HSBC Lions in South Africa

Late Thursday at LHR Terminal 5 British Airways we boarded the stately 747 next to “Air Force Scrum” with the throng of red-shirted Lions fans, and a few stragglers like me. I spotted Wales legend Ieuan Evans and Irish legend Keith Wood in business class. The boarding tunnel was buzzing with conversation when it ordinarily is filled with the strange silence of strangers stuck together in an alien metallic place. Estimates for the economic model of hosting the Lions rugby team have pegged around ZAR1 billion to the tour, not bad given the economic realities. The British & Irish Lions team consists of players from the four rugby unions of England, Wales, Scotland and Ireland (a political masterstroke considering the fraught Anglo-Irish history) with colourful stories on tour. The economic estimates are as notorious as weather forecasts, especially those by sunnyside-of-the-street tourism authorities and government agencies. Estimates were in 2005 the Lions tour pumped USD120 million into New Zealand's economy. South Africa is using it as dry-run to the FIFA World Cup 2010. What is the appropriate investment profile for the rugby tour?

HSBC is the proud Lion’s sponsor via a GBP4 million deal by FastTrack in 2007. The Lions brand is huge in the UK with blanket media coverage, even bumping football from the front-page news. Perhaps the emerging markets hook to South Africa works for them. HSBC South Africa entered the market by purchasing a small securities brokerage in 1990s at office nicknamed the "Mustard Mansion" in leafy Saxonwold, then a banking licence in 2004. We do know that HSBC can pay, not always a done deal post 2008 financial meltdown. HSBC is one of the first banks to wobble back in July 2007 as Forbes reported courtesy of their poor decision to buy in 2004 an American bank to gain exposure to the US property market, Household Financial. In May 2009, Chairman Stephen Green tried to assuage shareholders by admitting HSBC wishes they had never tried to conquer the US, in an investment analysts meeting on 24 November 2008 admitted it as “an essentially disastrous acquisition…” Refreshing frankness. HSBC’s first direct cost came when shutting  Decision One in 2007 and later Household in May this year, the experience getting them tagged as “legalized loan sharks” in the US. Yikes! WSJ reported last week that more pain is to come from sub-prime.

The better news about HSBC is their authentic efforts over some years to take on social responsibility and especially climate change, firstly in Europe. The US operation not so much.  HSBC South Africa is about community action; check out the solid HSBC Sustainability reports. Curiously, a quick JustMeans search has no HSBC coverage or community members? The HSBC USD100m climate initiative was launched in May 2007, when HSBC Corporate, Investment Banking and Markets (CIBM) launched the HSBC Global Climate Change Benchmark Index. Having launched in 2004, HSBC claimed to be carbon neutral from 2005 by investing in offsets (a disputed strategy, but noteworthy). As investors, the HSBC private and investment banks are active selling advice and building widgets for customers to invest in; they lifted Nick Robins from Henderson’s SRI team in London back in 2007; see the example of investing in climate change from HSBC Private Bank France 2008 conference. Climate change is a major effort by the UK government, and what the UK government is pitching climate change in southern Africa. The climate footprint of the Lions tour, with the majority of fans from the UK all making the 12-hour flight, is not inconsiderable. My own thinking is to buy a small farm along Route 62 about 3 hours from Cape Town. But if HSBC could get the thousands of fans with the cash to follow the rugby tour thinking about investing in climate change in their HSBC savings and pensions, that would be a good return-on-investment. And of course, to drown their sorrows in good (organic) South African wines after the 2007 Rugby World Cup champion Springboks will win!