HSBC under fire for $340m loan to energy firm involved in coal mine expansion

An entire village in West Germany is set to be demolished by energy giant RWE in order to make way for the expanded lignite coal mine, sparking outcry from climate protestors who have sought to barricade the settlement of Lützerath in order to stop the development this week.

A report on Thursday by The Times, based on work by The Bureau of Investigative Journalism, said the banking giant provided $340m in funding as part of the RCF to RWE. According to the article, senior executives at the bank advised against the borrower disclosing the loan to Garzweiler II open-cast mine.

An anonymous HSBC banker told TBIJ that it was their understanding the bank was happy to provide the funds but did not want to be publicly associated with the loan, calling the approach “questionable”.

According to data from Refinitiv, RWE received a total $5.4bn RCF from 25 participating banks, including HSBC, Barclays and Santander, which have made commitments to align their financing and investments with net zero by 2050.

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HSBC said: “Details of this financing facility and all its participating banks are in the public domain, as is normal. We have been clear we will finance energy companies who are taking an active role in transitioning to a net zero energy future, and we remain committed to this goal amid the double challenge of tackling climate change and an acute energy crisis in Europe.

“We have processes to ensure our financing aligns with our policies, which include an expectation on clients to produce and implement credible transition plans.”

A spokesperson for HSBC said the RCF was not extended to directly finance RWE’s coal mine expansion, but for general corporate purposes.

Back in December, HSBC announced plans for an “accelerated phase down of fossil fuel sources with highest emissions intensity and greatest local environmental risks”, as it updated its financing policies for oil, gas, and coal projects.

Most notably, the bank said it would stop providing new lending or capital markets finance for new oil and gas fields and related infrastructure, while simultaneously pledging to accelerate its activities in renewable energy and clean infrastructure.

TBIJ found that HSBC bankers raised the issue of village demolition plans internally and inquired about whether providing money to RWE would be in line with the bank’s net zero policy.

The bank’s sustainability and reputational risk department approved the deal but said that RWE should not publicise HSBC’s involvement. 

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Tony Burdon, CEO of Make My Money Matter, said: “By continuing to provide sizable corporate loans to companies involved in fossil fuel expansion, HSBC is not just damaging the environment and displacing communities, they are undermining their own climate targets.”

Elaina Bailes, commercial litigation lawyer at UK law firm Stewarts, added: “HSBC seem to have recognised already that this is not something they should be publicising.

“This exposes them to litigation risk if investors and shareholders are misled about the true nature of their activities compared to their public statements.”