- After Stuart Kirk, HSBC Global Asset Management’s head of responsible investment, argued that climate risk was overplayed, his comments were swiftly disavowed by HSBC’s top executives and he was suspended.
- Many are sceptical about the assertions by HSBC group CEO Noel Quinn and others in the leadership team about the group’s view on climate risk and its commitment to achieving net zero.
- Several institutional investor groupings preferred not to comment to Capital Monitor on the situation, but Kirk had raised several important points worthy of further debate.
What a difference a 16-minute presentation on climate change makes. The now-infamous speech by Stuart Kirk, head of responsible investment at HSBC Global Asset Management, last week on why investors have more things to worry about today than they do in 20 years’ time might well be remembered for a similarly long period.
What is less likely to stick in the memory is the financial group’s response. It should do, though, because it was an equally brazen act of self-defence that will have wider ramifications for how financial institutions tackle public discourse on climate change.
Without raking over the finer details – as has been done expansively already – we will underline one thing: Kirk made it abundantly clear he believes climate change is real, but it is not a financial risk worth worrying about.
The resultant public outcry was huge. Many investors and climate experts – and others besides – voiced their horror on social media at what they felt was an ill-conceived point of view. What’s more, existing and prospective clients of the firm are seen as likely to increase their due diligence of asset managers’ climate strategies as a result.
Desperate to distance themselves from the scene of the crime, the parent company HSBC sought, like any high-profile business, to act quickly and decisively. Kirk was suspended from duty while HSBC brought out its biggest gun, group CEO Noel Quinn, to set the tone.
In a LinkedIn posting on 21 May, Quinn disavowed any intellectual association with Kirk’s presentation. He said he did not agree “at all” with the remarks made and that they did not “reflect the views of the senior leadership of HSBC or HSBC Asset Management”. Quinn went on to stress the group’s commitment to achieving net-zero emissions. Kirk has since been suspended pending an internal investigation.
Yet many remain unconvinced by the messaging. Given Kirk’s speech was predicated on justifying this single point, it seems unlikely he is alone in his thinking.
And it’s not as if anyone responsible for vetting presentations could have missed the memo, either. HSBC Global Asset Management’s public messaging clearly fits with the view that climate change and financial risk are synonymous.
Climate approach contradictions
In its seven-page climate change policy report, published in 2020, the company states its desire to work with policymakers to “at scale… finance the transition to a low-carbon economy”.
It also highlights “strong” support for the Task Force on Climate-related Financial Disclosures (TCFD) reporting, emphasising that “without global action, investors holdings, portfolios and asset values will be impacted in the short, medium and long term” and acknowledging that severe climate events could “result in [asset] devaluation”.
What’s more, at a quick count Capital Monitor calculates that HSBC Global Asset Management has joined or pledged alignment with at least 39 initiatives or associations linked to at least one aspect of ESG. Of those, 27 are tied to the environment, many of which explicitly focus on the relationship risk of climate change to finance and investment.
Which is why the Financial Times’s revelation on 22 May that Kirk’s presentation had been signed off internally is arguably far more embarrassing to HSBC than the speech’s contents.
Given how tightly financial institutions manage their reputations, it is remarkable that such comments were considered suitable for a public airing in the first place.
We could debate the hows and whys of this PR cock-up for some time, but the most likely scenario is a very simple one: people who take this subject seriously have different views on how we tackle climate change.
And, like it or not, Kirk had some very important points to make, such as: how do we address short-term incentive structures? And should we apply more capital to climate adaptation rather than mitigation?
Silence is golden?
Given the number of climate-related initiatives HSBC Global Asset Management is associated with, the PR fallout to this could spread further. It seems several important groups, rather than grapple with the nuances of the presentation, would rather this whole incident were forgotten.
When Capital Monitor asked a handful of investor-led associations focused on climate and sustainability whether they welcomed signatory institutions holding opposing perspectives, the vast majority chose not to comment. Some, a little passive-aggressively, pointed us to press statements – unrelated to the HSBC affair – concerning their willingness to expel members should they fall out of line.
More forthcoming was Amy Hepburn, CEO of the Investor Leadership Network, which comprises 13 institutional investors with a combined $10trn under management.
Commenting on Kirk’s presentation, she says most institutional investors wholeheartedly believe climate change is a serious investment risk, but that she “welcomes transparent conversations about which value models and investment strategies are and are not supporting sustainable systems”.
Climate debate is necessary
And that is a key point. While Kirk’s position on financial risk and climate change is not officially shared by his employer or indeed many investors, Quinn’s blunt rejection of all the components of the presentation is akin to throwing the baby out with the bathwater.
Admittedly, Kirk is in the wrong gig to deliver what he did in the way he did. The former FT journalist failed to understand that big corporates don’t like to be in the public eye just for the sake of it. In the academic world, a difference of opinion is celebrated; it forces us to challenge our own thinking. In the corporate world, brand management is more important. Image is everything. And Kirk tarnished HSBC’s image.
But while many deride Kirk’s fundamental argument and his delivery, they were at least party to it. The biggest worry is that contrarian views get smothered for fear they contradict any existing public commitments and damage ‘the brand’. That road leads to increasingly anodyne and PR-safe remarks about being on a “journey” – something Kirk rightly derided.
Sadly, given how many vague, broad-brush climate commitments that financial institutions are making publicly, such an outcome seems ever more likely.