The UK's advertising regulator has banned two ads used by HSBC in a couple of cities that it said misled the public about the bank's green credentials. The story highlights the sensitivities around so-called "greenwashing" and the work of financial institutions to insert themselves into the space.

A UK advertising regulator has scolded HSBC for “misleading” adverts about the bank’s sustainability credentials, adding a further twist to concerns about businesses “greenwashing.”  

Separately (see below), Lloyds Banking Group, a UK rival to HSBC, has pledged to cease investing in new oil and gas projects, coal mining and nuclear energy that doesn't come under international regulations of nuclear power. It will remain involved in gas where that energy source is part of a transition to greener energy.

The advertisement ban actions against HSBC by the Advertising Standards Authority this week are another awkward moment for HSBC, which a few months ago axed a senior figure who criticised forecasts over how climate change will damage economic growth. (See here for an overview by this news service on the greenwashing issue.)

The ASA’s actions related to two posters for HSBC, seen on bus stops in Bristol and London in October 2021. The first poster featured an aerial image of waves crashing on a shore with text that stated "Climate change doesn’t do borders. Neither do rising sea levels. That’s why HSBC is aiming to provide up to $1 trillion in financing and investment globally to help our clients transition to net zero.” Earlier this year, the ASA was reportedly looking at the HSBC ads.

The second poster featured an image of tree growth rings with text that stated "Climate changes doesn’t do borders. So in the UK, we’re helping to plant 2 million trees which will lock in 1.25 million tonnes of carbon over their lifetime," the ASA said in its statement. 

The ASA said it received 45 complaints, including from Adfree Cities, who challenged whether the ads were misleading, because they “omitted significant information about HSBC’s contribution to carbon dioxide and greenhouse gas emissions.” "We concluded that the ads omitted material information and were therefore misleading," the ASA said in its statement this week. 

“The financial sector has a responsibility to communicate its role in the low carbon transition to raise public awareness and engage its customers, so we will consider how best to do this as we deliver our ambitious net zero commitments," a spokesperson for HSBC told this news service when contacted yesterday. 

On its website media page, HSBC has an article, written by Celine Herweijer, group chief sustainability officer, HSBC, and Nicolas Moreau, CEO, HSBC Asset Management. The article is entitled “Our approach to phasing out coal investments” (23 September 2022).

Banks such as HSBC have made much of withdrawing from carbon-based energy in recent years. The ASA ban highlights how firms that continue to have some involvement in fossil fuels, even if only as a transition phase, must disclose this. A wider issue is the extent to which rising energy prices, and the shift to so-called renewable energy sources, is viable and politically acceptable. In the UK, for example, the UK government led by Liz Truss (at least as of the time of writing) has moved to re-approve fracking of oil and natural gas in the UK. North Sea oil and gas development is due to increase. The European Commission, meanwhile, has adjusted its “taxonomy” so that natural gas and nuclear energy are deemed “green”. 

(This news service has a programme – Wealth For Good Awards – designed to highlight what wealth managers are doing to ensure that environmental, social and governance considerations are being imbedded into their practices. To find out more about the awards and the 2023 programme, click on this link.)

Lloyds
Separately, Lloyds Banking Group said it will not invest in new oil, gas and coal mining projects, and will only invest in nuclear energy that is regulated by specific international treaties. 

“Our sustainability strategy outlines our commitment to support the UK’s transition to a sustainable, low-carbon economy. We support the aims of the 2015 Paris Agreement, and the UK Government’s commitment to a net zero economy by 2050, which we recognise will require a radical reinvention of our ways of working, living and doing business,” the UK lender said. Among the details, it said its support for natural gas will only occur in the context of gas as a transitional form of energy.

"Lloyds’ new policy marks an important turning point in the dangerous relationship that exists between leading UK banks and fossil fuel companies. By becoming the first of the five largest UK high street banks to stop the direct financing of new gas, oil, and coal projects, Lloyds is making a clear statement on the future of financing for fossil fuel expansion. Such action is not only popular with customers, but also critical for our planet,” Tony Burdon, CEO at Make My Money Matter, said.

The ASA’s reasoning
Justifying its actions against the UK/Hong Kong-listed HSBC in the UK, the ASA said: “We considered consumers would understand the claims `HSBC is aiming to provide up to $1 trillion in financing and investment globally to help our clients transition to net zero’ in ad (a), and `we’re helping to plant 2 million trees which will lock in 1.25 million tonnes of carbon in their lifetime’ in ad (b) to mean that HSBC was making, and intended to make, a positive overall environmental contribution as a company.”

“As part of that contribution, we considered consumers would understand that HSBC was committed to ensuring its business and lending model would help support businesses’ transition to models that supported net zero targets. Additionally, they would understand that HSBC were undertaking an environmentally beneficial activity by planting trees which would make a meaningful contribution towards the sequestration of greenhouse gases in the atmosphere. We considered that the use of imagery from the natural world, and in particular ad (a)’s image of waves crashing on a beach, contributed to that impression.”

The regulator noted that HSBC’s ads appeared on high streets in October 2021, in the run up to the COP26 conference. 

“We did not consider that meant that consumers would understand the intricacies of transitioning to net zero, and would not expect that HSBC, in making unqualified claims about its environmentally beneficial work, would also be simultaneously involved in the financing of businesses which made significant contributions to carbon dioxide and other greenhouse gas emissions and would continue to do so for many years into the future,” the ASA said.

Robbie Gillett from campaign group Adfree Cities, who led the complaint against the bank, said: “This is a significant moment in the fight to prevent banks from greenwashing their image.”

“HSBC can no longer ply us with ads pretending they are green while continuing to bankroll climate breakdown in the background,” Gillett said.

The ASA said HSBC in the UK said it had been making the claim in the first ad since 2020 and aimed to meet the ambition to provide financing and investment globally to help some of its clients transition to net zero by 2030. 

HSBC said, in the ASA’s account, that the financing of greenhouse gas-emitting industries was required during the transition to net zero, and so its continued financing of those industries was not in conflict with the aims of a transition to net zero. It highlighted that the IEA’s 2021 report on net zero by 2050 outlined that at that stage the world would still need 20 per cent of current natural gas production, and 25 per cent of current oil production.

“Fossil fuels would play a critical role in a secure energy transition up to 2050 and would require financing. HSBC preferred a phase-down and industry engagement rather than divestment, an approach that had been drawn from the UN’s Principles for Responsible Investment,” the ASA statement said.

In the claims made in the second advert, the ASA said HSBC had entered into a four-year partnership with the National Trust, worth £4 million, to create 2,000 hectares of carbon-rich woodland. Under that partnership it endeavoured to plant two million trees by 2025 which, according to the Woodland Carbon Code, and based on the average 100-year lifespan of a tree, would lock in 1.25 million tonnes of carbon. The trees would be at various sites, and 90,000 had already been planted since the partnership’s inception.

The ASA said the bank thought that the claims the in ads “highlighted two tangible and specific short- to medium-term initiatives, capable of quantifiable measurement, and would not be seen as commenting, in a broader sense, on their green credentials or environmental contribution.”

“Furthermore, the ads had appeared in the run up to the 2021 United Nations Climate Change Conference (COP26), which they believed would have affected how the average consumer understood the claims made. Not least because there was a period of heightened media and corporate engagement on climate change leading up to, and during, the Conference, attended by debate about the role of banks in combatting climate change. The ads therefore did not mislead about HSBC’s total environmental impact and invited consumers to find out more about the initiatives through a call to action – `Search HSBC Sustainability’,” the ASA said.

Other firms have been caught in the regultory crosshairs. For example, the Securities and Exchange Commission in the US is pushing to make firms disclose more about their environmental impact, a move that has prompted some political pushback.

There have been controversies – last year US regulators reportedly probed Deutsche Bank’s asset management business, DWS Group. The firm’s former head of sustainability claimed that it exaggerated how it used sustainability measures to manage assets. DWS has strenuously denied the claim.