HSBC plans trader hires as part of first foray into carbon market
HSBC is looking to enter the voluntary carbon market for the first time, joining Citigroup, BP and Shell as the market for climate-related financial products heats up.
The bank recently posted a job opening for a carbon trader as it sees opportunities in developing carbon financial products.
The voluntary carbon market, though relatively small at about $1bn in market cap, is a fast-growing market as more firms commit themselves to reach net zero by 2050 or earlier.
The job description wrote the carbon market “could see significant growth and mature.”
“As liquidity and price transparency improve, we expect the market to evolve such that it supports a full range of financial products,” the job posting reads.
A spokesperson for HSBC told Financial News, “We’re exploring ways to help our clients transition to net zero using voluntary high-quality carbon market credits that can complement the decarbonisation of their own operations.”
HSBC has pledged to achieve net zero for its own operations by 2030 while helping to finance its clients’ transition goals. It is also a member of the Glasgow Financial Alliance for Net Zero.
However, the bank found itself defending its commitment to fighting climate change on 23 May after one of its senior executives downplayed the importance and urgency of climate initiatives, sparking a suspension from his duties and a public rebuke from the chief executive.
Many banks as well as oil and gas companies have had carbon trading and environmental commodity desks for many years, said Sofia Benmouffok, director of sustainable finance and impact investing at sustainability recruiter Acre.
Benmouffok told FN that as more firms commit themselves to net zero, the market has created more opportunities for banks and other financial firms.
“It’s quite supply constrained. It’s driving the price up for carbon offsets. Therefore, it’s becoming more and more an area of interest and development by financial institutions,” said Benmouffok.
For the most part, carbon traders come from a commodities trading background.
“You have to understand the nature of commodities trading. That’s what [carbon trading] is, with the added layer being through the lens of climate,” she added.
Demand for carbon trading talent has soared industry wide, and many firms are trying to cultivate knowledge within their own organisations, Benmouffok said. She added that as the market becomes more supply constrained, carbon traders also need skills beyond the trading desk.
“[Banks] are shifting from a trading mechanism into one that’s almost investment orientation,” she said.
Rival London bank Standard Chartered’s chief executive Bill Winters is an enthusiastic proponent of the carbon market. Winters serves as chair of the Taskforce on Scaling Voluntary Carbon Markets, a private sector group started by former Bank of England governor Mark Carney to scale and standardise the carbon market in order to meet the goal of net zero by 2050.
Unlike compliance markets like the EU’s Emissions Trading System, where heavy-polluting industries are required to purchase “allowances” for their emissions, the voluntary market is meant to be used to offset emissions. The voluntary market is aimed at ‘scope 3’ emissions which include investments into polluting industries.
However, regulators have been warning sustainable finance is rife with greenwashing and the voluntary carbon market suffers “severely from a reputational issue”. Winters said some of these accusations were a bunch of “blah, blah, blah”.
Whether that criticism is true or not, Benmouffok said market participants themselves are keen to have quality offsets.
“There is a huge amount of focus around quality currently in the marketplace,” she said. “We’ll need to grow pretty substantial quality-oriented methodologies. That’s going to be critical to this being a sustainable and buoyant market.”
To contact the author of this story with feedback or news, email Jeremy Chan