HSBC and its discordant climate songbook
A top executive at the global bank sings a different tune and rightly draws tomatoes and ESG broadsides
If Stuart Kirk had been a nondescript hedge-fund manager when he gave a speech questioning the financial consequences of climate change, it would not have attracted half as much controversy. But Kirk's job title was head of responsible investments at HSBC Holdings Plc's asset-management unit. That changes everything.
Kirk created a social-media storm last week after saying investors do not need to worry about climate risk, and regulators were creating too much work for him and his team on the topic.
HSBC Chief Executive Officer Noel Quinn said the comments, made at a conference hosted by the Financial Times, do not represent the views of the bank's senior management. The FT reported on Sunday that Kirk has since been suspended.
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The argument put forward was that the financial impact of climate change is probably either negligible or baked into asset prices already. Further out, humankind would adapt to the climate threat: Economies will grow and share prices rise as they had in the past.
Kirk was explicit that he accepted the science of climate change. He just thinks economies will expand regardless — there will be corporate winners and losers in both fossil fuels and clean energy.
Given that, he said, financial supervisors were putting disproportionate emphasis on weighing climate-driven financial risks.
While the former FT journalist has won online supporters for speaking his mind and going against the grain, that does not make the arguments convincing.
Business models are already being hit by climate risk. Just consider Shell Plc being ordered by a Dutch court to cut its emissions. After the UK oil major, who is next?
As for our ability to adapt to a warmer world, Kirk's is a rare piece of optimism but it's also a gamble. There is no compensation — certainly not a rising stock market — for the longer-term threats of famine, mass migration and lost biodiversity.
Kirk's parting comment that he agreed with the "just transition" did little to fill the yawning gap in his presentation relating to climate-driven inequalities between rich and poor nations.
Consider the other end of the debate, perhaps best captured by London-based TCI Fund Management. The activist fund manager believes climate change-related risks will have a significant impact on investor returns, whether from increased regulation, taxation, brand damage, financing costs or litigation.
TCI founder Chris Hohn said: "I can't understand how HSBC could employ someone in the job of head of responsible investment with those opinions."
That points to the central issue facing the bank. As the head of a team within a core subsidiary, Kirk is structurally involved in the organisation. It is one thing to be a thematic analyst with an original and dissenting opinion, but being an executive at odds with the house view is a difficult balancing act whether in public or private.
HSBC, like all banks, is trying to paint itself as supporting the energy transition, even as it continues to finance the fossil-fuel industry. Banks are finding it hard to avoid taking a stance on issues that matter to their customers and staff.
No doubt, Kirk's side comments did not help. He said he was more satisfied in a previous job, took repeated shots at an earlier speaker, referred to "nut job" doom-mongers and quipped that a submerged Miami could be a nice place — like Amsterdam.
A more carefully constructed and unembellished presentation would arguably have gotten him less flak — but less attention.
It is the function of regulators to force banks to pay attention to the future risks to businesses.
Today's long-term risks are tomorrow's near-term crises. And responsible investors should keep up the pressure on companies to minimise their climate impact, as well as funding new ventures that might be needed if efforts to mitigate climate change fail. Maybe climate risk is baked into share prices. If so, that is because investors do — and should — worry about it.
Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.
Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.
