ENVIRONMENT: THE GREENING OF HSBC

Or should that be "greenwashing", as critics have labelled a £35 million partnership between a leading bank, WWF and two other environmental charities?

Kirsten Downer looks at how the deal was struck and the issues it raises

More than half the world's population will face water shortages within 25 years. A global extinction crisis is looming, with at least 20,000 plant species under threat. Apocalyptic facts such as these may well have been part of what motivated banking giant HSBC to make one of the biggest-ever corporate donations to green causes.

The Investing in Nature partnership, launched in February, aims to restore major river habitats in three continents and save thousands of endangered species from extinction. In return for its money, HSBC wants WWF, Earthwatch and Botanic Gardens Conservation International (BGCI) to work more closely with it than charities have traditionally done with corporate donors.

There will be regular feedback on meeting targets, for instance, and several thousand staff from the bank will volunteer for conservation projects with the charities.

And in return for the "halo effect" that the bank gets from linking its name to green causes, WWF has got HSBC to embark on an energy management programme to reduce its use of things such as energy, paper and travel throughout its network. The charity has also extracted a promise from the bank to review the indirect impacts of its lending decisions.WWF, with 53 offices in Asia, Africa, the US and Europe, is the largest charity player in the partnership and receives £12.7 million mainly for three massive conservation projects along the Yangtze river in China, the Amazon in Brazil and the Rio Grande in the US. Earthwatch, an international charity that funds conservation research, secures £11.3 million for environmental research. BGCI picks up £8.1 million, mainly for protecting 20,000 endangered plants and public education programmes in five countries.As the five-year partnership matures, the programmes are expected to cross over. For example, HSBC staff returning home from volunteering on environmental research projects may embark on botanical projects in the UK in collaboration with BGCI."An organisation of our size has the ability to act as a catalyst for both large and small organisations to work together. We haven't had much cross fertilisation of (environmental agencies') work before," says HSBC's Amanda Combes, who manages the partnership for the bank.Starting this month, progress will be monitored through a series of quarterly meetings between the partners at HSBC headquarters, backed up by daily email and telephone contact. The key people driving the deal are HSBC corporate responsibility managers Amanda Combes and Alistair Riley; Peter Wyse Jackson, secretary-general of BGCI; Eve Carpenter, head of marketing at Earthwatch; and Nicky Bishop and Francis Sullivan, WWF's head of corporate fundraising and head of programmes respectively. Back in 2000, HSBC let environmental organisations know that it had plans for a "major" environmental partnership. The deal took 20 months to negotiate, and Anita Neville, communications manager at WWF, admits that the talks were not easy for WWF or HSBC. Eighteen months of "frank discussions" failed to get HSBC to agree to a policy on its Indonesian investments - the bank has still not signed an industry protocol on ecological forestry set up by the Forest Stewardship Council. But WWF gained leverage through the fact that Bishop already knew HSBC chairman Sir John Bond and because WWF's global reach made it a very desirable catch for a global bank. Like many other lending institutions, HSBC is linked, through its investments, to controversial and unsustainable industries. These include Indonesian logging and palm oil companies, dam projects and nuclear installations. The bank helped fund the Three Gorges hydro-electric dam in China, which disrupts the natural flow of the very river, the Yangtze, that the Investing in Nature partnership aims to conserve. This has naturally led to accusations that the deal is little more than a "greenwashing" to make the bank appear more environmentally friendly to its stakeholders than it actually is. Because WWF is a campaigning organisation, getting into bed with such a partner does pose a risk. There have been stories of rifts within the organisation following a report by its sister organisation in Switzerland which allegedly showed that HSBC has the heaviest involvement in Indonesian logging and palm oil companies of any British bank. Campaigning organisations such as Amnesty and Greenpeace avoid corporate and government donations because they want to protect their independence. It would appear that WWF has traded a degree of campaigning autonomy in return for the £12.7 million. According to Combes, HSBC has sought assurances that WWF will "not seek to campaign in a way that could jeopardise HSBC's business practices". Such an arrangement has been struck "without making our partners toothless", she says, but many green campaigners would disagree. However, the arrangement works both ways - the bank, too, now has to consider whether any of its future business decisions could jeopardise the reputation of its charity partners. As Combes says: "We didn't want to get into a position where we could compromise each other." Some WWF employees are sceptical about the partnership, admits Neville, but she claims newspaper reports have exaggerated the extent of the internal debate. "We have 3,500 people employed across the world. A healthy level of debate is to be expected in an organisation of our size but it is not the case that there were serious rows," she says. Nevertheless, WWF is taking its reputation management seriously. A communications officer is being appointed to deal solely with the Investing in Nature partnership. The communications officer will be backed up by an account manager and a programme officer, also focusing exclusively on Investing in Nature. Campaigners should not isolate themselves from businesses simply because they may not like all sides of their work, argues WWF. In fact, the more they want to change, the more reasons there are for engagement. "Any NGO gains a lot from being engaged, rather than standing on one side. Being involved in this kind of partnership will give us greater leverage in their business and a better insight into how the financial services world works," says Neville. Exhibit A in WWF's defence would be an attempt by HSBC to help establish a global benchmark for lenders to dam projects. Pressure groups want businesses to sign up to the World Commission on Dams guidelines, drawn up by the UN, which differentiate between sustainable and unsustainable dam projects. Unfortunately, these guidelines were not designed for use by financial institutions as the basis for lending decisions, and this is the main reason they have not been adopted, according to Combes. HSBC plans to hold meetings later this year "to explore a language that could be developed for use by lenders," she says. Exhibit B in the "engagement" argument is that last year HSBC adjusted its credit and lending guidelines to ensure that lenders consider environmental impacts as well as economic ones when making business decisions. Unfortunately, this change has not been substantial enough to improve the company's score on a social and environmental survey published by Morley Fund Management last month, where FTSE 100 companies were ranked according to social and environmental criteria. HSBC was ranked only a little way above BAE systems and British American Tobacco, which the survey described as "fundamentally incompatible with sustainable development". HSBC has committed to an energy management programme (focusing on things such as lighting, heating, paper and business travel) for its branch network in the UK and this is now being rolled out internationally. However, the bank's critics are bound to argue that this will have less impact than cleaning up its investments abroad could have. Greenpeace has traditionally taken a different approach to donations, and has a policy of not taking any cash from governments or corporations. Its campaigns director, John Sauven, did not wish to comment on the Investing in Nature partnership directly but says that most corporate social responsibility relationships tend to work the wrong way round. "Companies should first and foremost look at what they're doing as a company," he says. "Charitable donations should be the icing on the cake, not the cake itself." But more than 2,000 HSBC employees, from junior staff to vice-presidents, will volunteer for international conservation projects during the next five years as part of the Investing in Nature deal. Once they return, they are expected to initiate conservation projects at home and become environmental champions. Apart from the quarterly progress checks, WWF hopes that smaller subgroups will be set up involving charity staff and those at HSBC responsible for making lending decisions, says Francis Sullivan. If the subgroups go ahead, they could prove extremely significant. "This will be the first time anyone has got this close," he says. "Charities have acted as consultants and advisers before, but this is different - this is a partnership." First and foremost, WWF wants to change HSBC's lending policies that relate to fresh water - the focus of the Investing in Nature partnership - but then it hopes to move on to power generation and forests. No timeline or target has been established yet, but Sullivan believes that WWF's track record and the high-profile nature of the partnership will give it momentum. "Lots of people will be watching the bank to see what it funds - it has put itself in the spotlight," he says. "This partnership is a bold step for both us and the bank because it has to be based on results." HSBC'S RECORD IN SOCIAL RESPONSIBILITY HSBC is one of the largest banking organisations in the world, with 7,000 offices in 81 countries. The bank doubled the amount it spent on charitable causes between 1997 and 2001, when it donated £20.3 million, of which £7.3 million went to educational projects and £2.6 million to the environment. The bank supports initiatives in Asia, the Middle East, Europe, Latin and North America to reflect the global nature of its business network. HSBC offices in the UK and the US already measure their direct environmental impacts including electricity, gas, oil and water use, plus business travel and waste. A "green" travel policy for employees is planned, and the monitoring is to be extended to its offices in Hong Kong and Canada. HSBC did not score highly in an index of social and environmental sustainability published last month by Morley Fund Management. However, it came joint first in the banking sector in the Dow Jones Sustainability Index last year when it joined, and is a member of the FTSE4Good index, which measures company performance in the areas of environmental sustainability, stakeholder relations and support for human rights. It is also part of the Index of Corporate Environmental Engagement, which assesses more than 200 UK-based companies on the way their policies affect the environment. HSBC's new group-wide standard commits the bank to address the environmental and social implications of its business decisions, including lending. According to its corporate responsibility brochure, this means that the "bank will err on the side of caution if we think the environmental risks of a transaction outweigh the benefits. We will not automatically disengage from specific industry sectors, but implementing the standard may prompt changes to our client base over time". WHERE WILL THE MONEY GO? £12.7m - Conserving river habitats The largest chunk of money, £12.7 million, will fund river-based projects in China, Brazil, the US and UK, backed up by research and lobbying of governments and industry. The Brazilian and Chinese projects will kick off later this year. In Brazil, WWF will deliver a "Use and abuse of water" campaign aimed at an urban population of two million and set up a model for freshwater fisheries management that it hopes will be replicated by government after the end of the five years. HSBC's money enables WWF to expand its work along the 4,000 mile Yangtze river in China from 1,100 to 100,000 hectares, an area the size of Greater London. In China, WWF will restore wetland eco-systems and assist in a government programme helping farmers diversify from rice to livestock. £8.1m - Saving plants from extinction Botanic Gardens Conservation International will receive a donation of £8.1 million to help step up its plant conservation activities in 16 major botanic gardens in Argentina, Brazil, Indonesia, India and the Middle East. Two and a half million people in more than 10 countries will also be targeted by new public education programmes highlighting the importance of plant conservation. A new web site will be created to help inform 400,000 people about 2,000 botanic gardens. £11.3m - Creating environmental champions International environmental charity Earthwatch gets £11.3 million for its research programmes and for training 200 scientists from developing countries. In addition, 2,000 HSBC staff will volunteer on projects ranging from the decline in dolphin populations in the Mediterranean to tracking endangered jaguars in Brazil. The HSBC volunteers will get an HSBC Employee Environmental Fellowship to set up an environmental project when they return. Employee volunteering is useful for companies as it helps develop leadership skills and builds team loyalty. Some companies already operate employee volunteering schemes through Earthwatch, but HSBC's initiative dwarfs existing corporate schemes.

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