(Bloomberg) — HSBC Holdings Plc has abandoned plans to build a carbon credits desk, according to people familiar with the matter, as Europe’s biggest bank cools to a market rocked by repeated allegations of greenwashing.
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The decision means the bank is no longer working to build a dedicated unit focused on trading credits in the voluntary carbon market or on financing project developers who sell into the VCM, according to the people who asked not to be named discussing private information.
A spokesperson for HSBC declined to comment.
HSBC’s carbon-desk plans were relatively short-lived. The bank explored moving into the market a couple of years ago, just as it peaked, seeking new hires to build a trading book and offer liquidity to clients. Then in 2023, the voluntary carbon market shrank by almost a quarter to roughly $1 billion as greenwashing concerns prompted companies keen to offset their carbon footprints to back away.
The HSBC bankers assigned to the desk have since been allocated other roles.
A carbon credit is supposed to represent 1 metric ton of emissions that have been avoided, reduced or removed from the atmosphere. Carbon credits are sold by project developers, often in developing economies, that invest in areas such as reforestation. The companies buying the credits then claim to have compensated for their emissions. In practice, however, studies have uncovered widespread instances of projects issuing more credits than they merit.
Companies including Delta Air Lines Inc., Alphabet Inc.’s Google and EasyJet Plc — once among the biggest corporate buyers of offsets — have moved away from the market. Many are now focused on the more expensive task of reducing their own emissions.
And last week, Bloomberg reported that Shell Plc is looking to sell a majority stake in its portfolio of nature-based carbon projects. The portfolio, which covers dozens of projects, was launched in 2018. The oil major also was the world’s largest publicly disclosed buyer of carbon credits last year, according to BloombergNEF.
The voluntary carbon market has “dropped considerably over the last two years” and “it’s been pretty awful for those involved,” Abyd Karmali, managing director, environmental business advisory at Bank of America Corp., told Bloomberg last month.