The case discusses the predicament of Stuart Gulliver (Gulliver), HSBC Group Chief Executive, who was facing a lot of criticism for the banking giant’s coal financing in general and of Drummond Limited Colombia, in particular. Drummond, a coal mining company, was accused of grave human rights abuses and of causing environmental damage in Colombia. Activist groups accused Drummond of unresolved labor disputes, environmental practices, and an unethical relationship with the paramilitary forces responsible for the murder of civilians. They alleged that HSBC had deliberately ignored its due diligence process while reviewing social and environmental risks associated with the mining project and maintained a silence in disclosing any information regarding Drummond, citing client confidentiality. Critics urged the bank to stop financing Drummond and live up to its commitments of maintaining environmental friendly practices and redressing human rights grievances in the affected areas of the mining project. However, HSBC did not respond adequately and continued to support Drummond amid widespread criticism of its fossil fuel investment. This was even as the bank advised its investors to move away from funding projects on fossil fuels toward building a low-carbon economy. While HSBC sought to establish a lasting relationship with the stakeholders with the objective of generating value in the community and delivering long-term shareholder returns, the bank’s continuing support to Drummond mining reflected a shifting of values between the bank’s investment strategy and its sustainability commitments, according to critics. Some analysts felt that HSBC’s continued support of coal financing implied that it had inadequate coal finance policy coverage, which could expose the bank to sustainability risks.. .

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Issues

The case is structured to achieve the following teaching objectives:

	Understand the sustainability strategy of a bank wherein the social, economic, and environmental policies are integrated with its operational framework..
	Evaluate HSBC’s Drummond financing in Colombia and discuss and debate whether the bank is going against its sustainability standards through it..
	Discuss and debate whether HSBC should move away from financing the fossil fuel sector
	UndIdentify the risks faced by the bank going forward and explore the ways to re-establish the sustainable footprints of the bank in its business operations.

Contents

INTRODUCTION

HSBC AND ITS SUSTAINABILITY INITIATIVES

COAL MINING IN COLOMBIA AND DRUMMOND

CONTROVERSY OVER DRUMMOND FINANCING

ALLEGATION BY ACTIVIST ORGANIZATIONS

HSBC NOT AS GREEN AS IT CLAIMS?

HSBC’S RESPONSE

LOOKING AHEAD

EXHIBITS

Keywords

Sustainable finance; Sustainable investment; Project finance; Global asset management; Fossil fuel portfolio and investment; Climate change challenges; Human rights and sustainability; Social and environmental risks; Environmental, Social, and Governance (ESG) criteria; Stakeholder tension; Stakeholder engagement and dialogue

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