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There’s a reason why regulators want bankers to start planning for climate change now

May 25, 2022, 11:41 AM UTC

Presentations delivered at financial investment summits rarely manage to capture the attention of the audience in the room, let alone headlines around the world.

So perhaps some kudos are owed to HSBC’s Stuart Kirk, whose climate “nut job” speech at the Financial Times’ Moral Money conference last week captivated global audiences and exposed a rift between what banks think in private and what they say in public.

To recap: Kirk, HSBC’s head of responsible investing, delivered a presentation telling investors that they need not worry about climate risk, nor buy into the “hyperbole” that we are “all doomed,” assuring the audience that markets will adapt.

But some of Kirk’s more frivolous and, maybe, callous comments—such as asking who would care if Miami is under water in 100 years—stoked public backlash after the FT reported them. Out of context and, to a large extent, even in context, Kirk’s comments present the banker as a vehement climate change denier, which is maybe not the sort of person you want running a responsible investing program.

HSBC quickly suspended the banker, assuring everyone that Kirk’s comments don’t reflect the views of the bank. But, as my colleague Sophie Mellor reported, HSBC executives had approved Kirk’s speech months in advance, and the bank is the 13th largest funder of fossil fuel projects still.

The editorial board at the Wall Street Journal, meanwhile, thinks HSBC faltered by suspending Kirk and has praised the analyst as “merely [saying] what many in his industry believe but are too timid to say: Climate change poses a negligible risk to the global economy and bank balance sheets.”

But, having watched Kirk’s speech, I’ll admit I’m still lost as to what exactly his point is.

On the one hand, Kirk doesn’t seem to deny that climate change is happening and will have consequences, he just believes that humans—or rather, markets—will “adapt” and therefore mitigate the (financial) risks. Kirk’s presentation could even be seen as an optimist’s outlook, as he urges investors to focus on making money from the “just transition.” At the same time, however, Kirk appears frustrated by having to engage in that process of adaptation.

“What bothers me about this one is the amount of work these people make me do. The amount of regulation coming down the pipes. The number of people in my team and at HSBC dealing with financial risk from climate change,” Kirk laments.

HSBC’s suspended head of responsible investing says he would rather be free to spend time focused on more immediate issues, such as the “attack” from crypto and “the China problem” (which, whatever that is, is surely a long-term event as well).

Yet Kirk’s complaint over how climate adaptation requires foresight and planning exposes exactly how the short-term focus of financial markets makes them an ineffective tool for tackling the long-term threats of climate change.

Why are markets generally going up at the same time that warnings of climate catastrophe are increasing? Kirk asks, rhetorically, before inadvertently answering his own question.

“What happens to the planet in year seven is irrelevant to our loan book,” Kirk says, explaining that the typical loan at HSBC looks at a six year time frame. The slide behind him says: “Even if climate change risk isn’t negligible, it’s too far in the future to matter for most companies.”

That’s the disconnect. Investors can undoubtedly still make money betting on oil and gas stocks for the next six years, 12 years, or until the wells run dry. But the consequences of climate change can’t be resolved in one six-year window and need to be prepared for now.

That’s why regulators are making analysts like Kirk think about it early.

Eamon Barrett
eamon.barrett@fortune.com
@eamonbarrett88

CARBON COPY

CCUS

Software giant Salesforce announced it will invest $100 million in “carbon dioxide removal” projects by 2030, specifically by buying $100 million worth of carbon credits tied to carbon-removal tech. Salesforce is making the investment as part of the First Movers Coalition goal to tackle emissions in seven industries, like cement production, where carbon reduction is most difficult. Salesforce’s $100 million bid comes weeks after another coalition of tech conglomerates, called Frontier, pledged $925 million to buying carbon removal credits. Salesforce

Dual FX

European gas buyers have reached an agreement with Russia’s Gazprom to keep natural gas supplies flowing, after Moscow demanded that importers settle payments in rubles. Sanctions against Russia have European, and U.S. importers from paying in local fiat. The new arrangement requires European gas importers to set-up two accounts with Gazprom’s financial arm, Gazprombank. Buyers will deposit euros in one account and Gazprom will convert and withdraw the funds through the second account, in rubles. Roughly half of Gazprom’s clients have reportedly opened ruble accounts at Gazprombank. WSJ

Shell

Climate protesters disrupted the Shell AGM in London Tuesday, delaying the meeting for several hours, before police were called. Protesters accused Shell of failing to abide by a court ruling issued in the Hague last year that ordered Shell to cut emissions 45% by 2030. Shell, which moved its headquarters to the U.K. from the Netherlands after the Dutch court delivered its verdict, is appealing the ruling. When the AGM resumed, shareholder votes showed a drop in support for some climate-forward proposals. But one activist investor says the dwindling support is due entirely to the war in Ukraine. Bloomberg

Glencore bribery

Mining and commodities giant Glencore will plead guilty to multiple charges of corruption, market manipulation and pay $1.5 billion in fines as settlement to a years-long multinational investigation led by Brazil, the U.K. and and the U.S. The investigation found that Glencore had paid African ministers over $25 million in bribes to secure preferential access to crude oil supplies. FT

IN CASE YOU MISSED IT

Fixing the carbon market’s wealth gap is key to fighting climate change, Davos panel says by Dan Reilly

Chile’s lithium mining dilemma: reconciling economic opportunity with environmental concerns by Genevieve Glatsky

The missing piece in the clean energy puzzle by Jacqueline Novogratz

Eco-friendly death care market grows amid demand by Lisa Held

U.S. may take a hugely controversial step to stop Russian oil exports funding the war in Ukraine by David Meyer

The private market can speed up disaster recovery. Here’s how by Priscilla Almodovar

Top bank chiefs unimpressed after banker gives speech about ‘nut job’ climate change doom-mongers by Sophie Mellor

Musk claims S&P ‘lost their integrity’ after Tesla gets booted from sustainability index while Exxon is included by Christiaan Hetzner

CLOSING NUMBER

$178 trillion

If left unchecked, climate change could cost the global economy $178 trillion by 2070, Deloitte says in a new report. Deloittes model assumes that average global temperatures would rise 3 degrees by the end of the century if unabated. The APAC region would suffer the worst economic losses, Deloitte says, shedding $96 trillion worth of GDP in the next 50 years. Climate events such as floods, deadly heat waves, drought and even some secondary fallouts such as declining tourism would decimate developing economies. But, Deloitte also provides the counter balance: if economies get their act together to mitigate climate change and achieve Net Zero by 2050, the global economy could gain $43 trillion in value. 

"The time for debate is over. We need swift, bold and widespread action now—across all sectors," Deloitte Global CEO Punit Renjen says.

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