HSBC Bank logo is seen in this illustration taken March 12, 2023. REUTERS/Dado Ruvic/Illustration
LONDON (Reuters) - Britain's biggest bank HSBC has partnered with Google to finance fast-growing climate technology firms behind some of the world's most promising solutions to global climate change, executives from both firms told Reuters.
Under terms of the partnership, HSBC will look to provide financing to companies cherry-picked by the U.S. technology giant to join its Google Cloud Ready-Sustainability programme.
Members of the programme undergo a validation process, with Google assessing quality and efficacy of the technology in development as well as its traction among customers.
"What we're seeing is companies wanting to accelerate delivery of their sustainability goals. But there's a degree of confusion as to which solutions out there are going to help solve their problems," said Justin Keeble, managing director for global sustainability at Google Cloud.
"HSBC's finance will help those partners scale their businesses, and then HSBC will help customers access all this innovation."
Martin Richards, global head of climate tech and sustainable finance at HSBC, said Google's due diligence provided "a certain comfort" that complemented the bank's own assessment of potential new 'venture debt deals' - where a lender provides debt financing for inherently riskier companies.
Scaling technologies that can help the corporate world move more quickly to a low-carbon economy dominated the COP28 climate talks in Dubai in December, and is a crucial part of most banks' efforts to drive a global push to cut emissions.
But finance to the sector fell sharply in 2023, PwC data shows, as investors and lenders fret about risk.
"We feel like we are increasing our odds of success by working with partners like Google. We recognise we're taking credit risks but that is all part of banking," Richards said.
AMBITION
The tie-up with Google's cloud computing arm comes a year after HSBC bought the UK unit of failed tech lender Silicon Valley Bank (SVB), a deal brokered by the UK government in an attempt to avert contagion in the startup world.
The availability and impact of venture debt remains a key concern for policymakers. SVB was a significant player in the space but more mainstream lenders have tended to eschew the market, citing risks to capital.
Research from the International Energy Agency suggests almost half the emissions reductions needed to hit net-zero by 2050 will rely on currently unscaled technology.
Just six months after acquiring SVB UK, HSBC said it would aim to provide $1 billion in funding to climate tech companies across a range of sectors, including electric vehicles, battery storage and sustainable food systems by 2030.
Richards said HSBC was "well ahead" of internal targets on that goal, and was hopeful the partnership and the launch of HSBC Innovation Banking would accelerate progress towards a more ambitious target of transitioning 1.3 million clients to net zero by 2050.
The 30 companies in the initiative provide cloud-based tech solutions designed to help customers reduce their carbon emissions by processing data on their sustainability risks.
"If you're an airline, and you need to get to net zero using sustainable aviation fuels, you're going to need to know the players who will come to market quickest and meet their production goals fastest," Richards said.
Over time, HSBC would facilitate introductions between existing customers and climate tech firms to aid transition, he added.
Alongside news of the tie-up with Google, HSBC said it had also inked the partnership's first venture debt deal with a startup called LevelTen Energy, which runs a marketplace for buyers and sellers of renewable energy.
Lending terms were not disclosed.
"Technology and finance are going to be key enablers of climate action. HSBC were very drawn to our belief that essentially the sustainability challenge is really a Data Challenge," Google's Keeble said.
"And increasingly, our mutual customers are having to manage vast amounts of data and uncover useful insight from that to take action."
(Editing by Mark Potter)
