Equator Principles

The Equator Principles provide a risk management framework for financial institutions to identify, assess and manage the environmental and social risks of financing large projects.

The framework seeks to ensure that these projects are developed and operate in accordance with good international environmental and social standards. HSBC voluntarily adopted the Equator Principles when they were first launched in 2003. The latest (fourth) iteration of the Equator Principles (“EP4”) came into effect on 1 October 2020.

Financial institutions that have signed up to the Equator Principles are required to apply the Equator Principles to project finance with total project capital costs over $10 million, project-related corporate loans and project-related bridge loans, as well as applicable advisory mandates.

One of our obligations under the Equator Principles is to report on how we implement them, and the following sections provide an overview of actions we have undertaken.

We act independently and voluntarily in our decision-making. We may consider any project, and we decide whether to finance (and the terms on which we are prepared to finance them) based on our own business interests, priorities, and objectives.

Implementation

HSBC’s procedures for applying the Equator Principles form part of our sustainability risk policies. For transactions that fall under the scope of the Equator Principles, our global businesses must complete the appropriate implementation template, including the requirements for each applicable Principle, and conduct a risk analysis and recommendation through the credit risk process. Our Sustainability Risk Managers assist our global businesses on interpretation and application of Equator Principles requirements where required. The Reputational & Sustainability Risk team is also responsible for the development and management of the Equator Principles implementation and our internal processes for applying the Equator Principles.

2023 Equator Principles reporting

As required by the Equator Principles, we report the number of transactions we have completed using the Principles, with breakdowns by sector and by region. This is shown in the PDF below. HSBC has reported on project-related corporate loans – a requirement of the Principles – for a number of years and continues to do so. We also provide data on the number of loans that were independently reviewed. A total of 34 EP-compliant deals are being reported for 2023, a 21% increase from 2022.

10 category A and 24 category B projects have been reported as reaching financial close. There were no category C projects to be reported for 2023.

The majority of transactions were rated as category B and are in the US power sector, more specifically the projects are related to renewable power and align with the US government’s net zero pathway.

Additional notes

HSBC’s Equator Principles report (the Report) is prepared for the sole purpose of fulfilling the reporting requirements for Equator Principles Financial Institutions as set out in the Equator Principles. The Report should not form the basis of any third party’s decision to undertake, or otherwise engage in, any activity and third parties do not have any right to rely on it. The Report, by its nature, is not comprehensive and has not (save as expressly set out therein) been independently verified.

In making the assessments and determinations further described in the Report, HSBC uses such information as it determines necessary and relevant in its sole discretion.