Sustainability is the investment opportunity of the century: Kurt Vogt, HSBC

Author:
Denise Puca
Reading time: 4 minutes
22 September 2016

We sat down with Kurt Vogt, Managing Director of Sustainable Financing at HSBC, to learn about the landscape of sustainable finance, and where the opportunities lie. HSBC hosted the second annual Sustainable Finance Briefing during Climate Week NYC on September 19, which focused on the latest developments in global climate finance and saw the launch of the Bonds & Climate Change: State of the Market 2016 report by the Climate Bonds Initiative.

What are the barriers to investment in the low carbon economy and how can the market be reformed to scale-up climate finance?

There are a couple of big opportunities I see to develop climate finance. Firstly, green investment opportunities, such as investments in energy efficiency, are often small scale and can be very fragmented. A mechanism to aggregate green projects would make it easier to do more business efficiently.

Another challenge is making the business case for green bonds clearer. Policy incentives that create even a relatively small change in the price of green investments can drive investors and CFOs to pay more attention to green finance, rather than conventional bonds.

What factors have enabled the recent rapid growth in the green bonds market? What can investors expect to see in this sector in the future?

In recent years we have seen several exciting trends in the green bonds market:

  • Strong collaboration in the sector between issuers, investors, non-profits, and assurance and advisory firms is being developed which is helping to promote improved common standards of governance and reporting. 
  • Investments in the low carbon projects through green bonds are hitting new records in markets like India and China, thanks to a clear policy guidance from public sector organizations including development banks and utilities.
  • The creation of new assessment and ratings initiatives for green bonds – including those launched recently from Moody's, S&P, MSCI, and Morningstar – is driving greater interest in the sector.
  • With the recent ratification of the Paris Agreement by 60 countries, there is a greater demand for green investment products globally, which will keep growing as we move towards a low carbon, net zero emissions global economy.

Can you give some examples of how HSBC has promoted sustainable finance initiatives?

Sustainability is a priority for us globally, with our efforts in Sustainable Financing at the forefront, especially over the last few years.

Our strategy in the Americas focuses on four key themes: renewable energy, sustainable buildings, smart cities and sustainable supply chains. The opportunities that are presented when we approach bonds, loans, securitizations, and other corporate financing solutions from a low carbon, climate friendly perspective are vast; it helps to grow our business sustainably, in a way that serves both our clients and our communities.

As one of the top three global underwriters of Green Bonds in 2015, as highlighted by the Climate Bonds Initiative, we are really pushing for the overall development of the market.

Last year, for example, HSBC helped the International Finance Corporation issue the world’s first renminbi [local Chinese currency] green bond.

To date, we have committed to invest US$1 billion in green bonds and contribute to various multi-stakeholder initiatives including the ICMA Green Bond Principles, FSB Taskforce on Climate Related Financial Disclosures, and the Carbon Pricing Leadership Coalition.

What can be done to get more American businesses and investors to support the low carbon transition?

By building understanding and expertise on low carbon technologies, and by arranging the finance that will help bring these technologies to market at scale, HSBC – and the businesses and investors who are our clients and customers – are supporting a low carbon future.

Incorporating ambitious sustainability targets as part of our key goals, and focusing on renewable energy, recycling, energy efficiency and conservation, we will be able to thrive and set an example on climate leadership.

We already see this principle working through solar and wind energy, net zero buildings, smart cities and sustainable value chains. To keep global warming and other climate crises at bay, we need to invest trillions of dollars in sustainable technology in the next 30 to 50 years.

 
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