HSBC has issued a guide-line stating that it will only finance freshwater infrastructure projects that are environmentally and socially sustainable.
The Freshwater Infrastructure Sector Guideline, drawn up in consultation with WWF, means the bank will not provide financial aid to projects that significantly degrade or convert 'critical' natural habitats.
The guideline follows the World Commission on Dams' recommendations on standards for dam construction and management and the Ramsar Convention on Wetlands, an inter-governmental treaty pledging international co-operation for the conservation and use of wetlands.
It also follows the European Union Water Framework Directive, ensuring all water bodies attain good ecological status by 2015.
"We know that sustainable success must go hand in hand with the highest standards of behaviour," said Sir John Bond, group chairman of HSBC Holdings.
"Freshwater conservation is the responsibility of businesses, governments and non-governmental bodies alike.
"By putting freshwater on the global agenda, we can all help support the World Summit on Sustainable Development in its efforts to cut the number of people without access to clean water and sanitation."
The guideline supports the United Nations Millennium Development Goals, which set a target of halving the number of people who do not have access to clean water and sanitation by 2015.
Bond said: "The guideline ensures that our activities in the freshwater sector reinforce our efforts to reduce the social and environmental impacts of our operations.
"It is fitting for us to lead the way in defining appropriate standards, and to support our customers in achieving them."
HSBC will not give money to dam projects that do not conform to the WCD Framework or projects that have a substantial impact on any location listed on the Register of Wetlands of International Importance or as a Unesco World Heritage Site.
Bond said it is part of the bank's ongoing commitment to the Equator Principles, a set of voluntary guidelines that help address the environmental and social issues that arise in financing projects.
The principles were established when the International Finance Corporation, a member of the World Bank Group that finances and provides advice for private sector ventures in developing countries, convened a meeting of banks in 2002 to discuss the development of a banking industry framework for addressing environmental and social issues in the projects they finance.
"We don't see the Equator Principles as an add-on to our business," said Jon Williams, HSBC head of sustainable risk management. "It's a key part of a much wider approach to managing the sustainability of our lending."
"Upholding certain principles and values has served HSBC well throughout our history and stands us in good stead today," added Bond. "Public perceptions of a wide range of social, ethical and environmental issues are evolving constantly."