Stewart James is Managing Director, Group Public Affairs, HSBC. He answers questions about how he aims to help the bank respond to the challenges and opportunities created by public policy on climate change.
What did you do before joining HSBC?
I started my career in the UK government, helping to negotiate European environmental regulations affecting industries such as automotives and oil and gas.
I have also worked in other public bodies including the World Bank. Its mission is to end poverty and you can’t think about poverty without thinking about climate change, because poorer countries are often the most vulnerable to its effects. So I’ve seen the debate about climate change from different angles over the years.
Has the tone of the debate between business and government on environmental issues changed?
There is no way the public sector can meet the challenge of climate change alone
It’s moved on a lot. The scientific consensus that climate change is real and that human activity is a contributing factor has led to a better understanding of the challenges. Many in the private sector want to help and are committed to making their business more sustainable.
When I was working on regulations affecting the car industry 15 years ago, for example, it felt very much like a case of government telling industry what to do. Since then, the automotive sector has invested huge amounts in becoming more sustainable, exploring technologies such as electric cars and high-performance batteries.
In finance, many asset managers want to reduce their exposure to industries that cause environmental damage because they question how successful heavily polluting companies are going to be over the long term – while investors, especially younger investors, increasingly demand green investment options.
Many parts of industry want to be part of the change. But they are also looking to public policymakers to offer greater clarity about the pace and nature of change they expect to see.
What are the key topics being debated today?
The Paris climate change conference in December 2015 (known as COP 21) was a turning point. It set a high level of ambition across emerging and developed economies alike to tackle climate change. Now countries have to match that ambition with practical steps to actually achieve their goals. Policymakers are going to have make some tough decisions about what new laws they introduce, how and when.
We are seeing different countries take the lead. Ten years ago you’d have said that European environmental standards were a model to follow. Over the past five years, China has really stepped up. The country’s leaders have a political imperative to make big changes and reduce pollution.
They are encouraging the growth of the green bond market to boost investment in green projects. They are introducing a domestic carbon price, making heavy industries pay a price now to reflect the long-term environmental cost of the carbon dioxide they produce. Internationally, too, China is taking a lead, making a strong case in the international community for progress on environmental regulation.
What does your team do?
We analyse new policies and help people in HSBC understand what it might mean for them, how they need to adapt and the risks or opportunities that might arise. We also talk to policymakers to provide an HSBC view of how the policy framework needs to develop in order that the private finance necessary to tackle climate change is brought to the table.
Creating a shared understanding about how laws should work in practice is vital to enable the green finance market to grow, and to help the economy achieve the shift to low-carbon. But we also need to find ways for the public sector balance sheet to leverage private finance. There is no way the public sector can meet the challenge of climate change alone. Experts such as the UN believe around 80 per cent of the finance needs to come from the private sector.
Where do you see the big challenges and opportunities?
Solving climate change requires a collective approach. That means sharing risk, and may require both public and private bodies to use their balance sheets differently. But I’m optimistic that we can make progress, and the level of commitment to environmental issues in HSBC is encouraging. Ultimately, when it comes to climate change, we cannot afford to be on the wrong side of history, morally and commercially.