- Transition to Net Zero
Leveraging existing talent – and infrastructure – to fight climate change
Zoë Knight, Managing Director and Group Head of the HSBC Centre of Sustainable Finance, shares her key takeaways from CERAWeek 2022, where she was a speaker.
Some 5,000 people, including many experts from the oil and gas industries, came together to discuss industry events and the challenges facing the sector. Driving the energy transition in an orderly fashion was a key theme addressed during this year’s CERAWeek conference. There was an emphasis on the important role the sector has to play in solving climate issues. Yet, there was also an awareness of the “trilemma” facing the sector, says Zoë Knight, as tensions pull between energy security, energy access, and addressing climate issues. Financing the energy sector’s transition is vital to help achieve net zero ambitions and HSBC is looking to play a key role in this.
Part of driving the energy transition in an organised way, says Knight, is an awareness of the expertise the sector already has.
She sees the importance for the sector of using existing talent to solve and drive the transition.
“The physical infrastructure is there, the expertise, the knowledge,” she says. “A lot of CEOs were talking about the depth of engineering experience, the talent pool, the existing infrastructure in the sector that can be used as a solution.”
The power of the collective
Coming together as a sector at CERAWeek was a way to start working on these issues as a collective – something that is vital to drive the energy transition.
“Every single person referred to the importance of partnerships,” says Knight. “There's a reason that the whole world hasn't acted on climate sooner. It's not that people haven't known there is a problem, it's that they haven't been able to solve the problem by themselves.”
She continues by suggesting that the collective must include, government, civil society, and investors financing industry, and she thinks that this combined response will create change faster than has happened so far, when people were trying to do things on their own.
Partnering for the Future
One way this will be driven forwards is through innovative partnerships. For example, as part of the countdown to COP27, the Egyptian petroleum ministry announced that a coalition of energy companies will work to decarbonise downstream facilities in Egypt. HSBC will serve as a financing partner as part of this pilot project for the Egyptian oil and gas industry, helping them on their path to transition. This is an example of the type of collaboration that will help the industry move forward and is something that we would expect to see more of in the future.
HSBC have set net-zero aligned targets to reduce financed emissions from oil and gas, as well as the power and utilities sectors, as well as targeting a reduction of 34% in absolute on-balance sheet financed emissions by 2030 for the oil and gas sector.
HSBC is fully committed to working with clients to develop valid, science-based transition plans, supporting them to replace old technology with new, greener alternatives.
The targets that HSBC has for reductions in financed emissions in these sectors are an important step in relation to our ambition to become a net-zero bank by 2050 or sooner.
Already high on the world agenda, emissions look set to soon be scrutinised even further. Over the next two to three years, Knight explains, there will be satellite monitoring introduced that will measure emissions in real time, and deliver weather map-style reporting capabilities.
“So, it's going to be very transparent as to who's doing what, where. So very soon, high-emitters won’t be able to hide.”
"At CERAWeek, there was an element of frustration from the sector, that it is not being taken seriously by investors in terms of its role as a solution provider for the transition.
“All of them are worried about access to funding,” says Knight.
“However, if we stop financing oil and gas, the sector will never be able to make the transition to keep providing energy. Walking away is not the solution.”
Future proofing Energy
At CERAWeek, there was much awareness of competing tensions in energy provision and these tensions are being exacerbated by turbulent world events.
“What’s tricky is the trade-off between energy security, energy access and addressing climate,” says Knight.
There are currently many energy security concerns. And as supply shortages squeeze prices, there is an inflationary impact, with a knock-on effect to the broader economy.
Addressing energy systems has certainly now become a widespread priority.
Experts at the conference stressed that the sector wants to do more to educate society around how it is part of the solution rather than part of the problem.
The desire for a transition is there. The expertise is there. And the sector is well equipped to drive the transition. There is existing expertise and architecture in place that can be repurposed. For example, looking at the role of hydrogen, using existing infrastructure set up for gas, and putting hydrogen through as part of the blend, is one way to repurpose what is already in place. Financing hydrogen was one of the specialist topics Knight spoke about in an event at CERAWeek.
CERAWeek showed the depth of leadership in the oil and gas sector at present, and was, says Knight, an “eye-opening experience.”
It showed how deeply investors are thinking about climate and energy transition. Yet it highlighted that a key difficulty energy companies are facing is one of public perception in managing the energy transition.
Coupled with concerns about access to funding, this leaves energy companies in a difficult position. But delaying progress now could be costly for the climate.
“The industry has got this tricky issue to deal with, how do they articulate a strong and engaging narrative about their own shift and the speed at which they are innovating to address the climate problem?” asks Knight.
Could the sector that is sometimes seen as part of the problem, instead be seen differently – as part of the solution – with the infrastructure and expertise already in place?
This is a moment when all eyes are focused on energy provision. It is also the point at which the energy sector is making a huge transition – from providing energy in the old ways it always has, to provision in more climate-friendly ways. HSBC will be there to support this.
Roadmaps for energy transition
Examining the pathways to a net-zero world, how we can get there, and how we address the short-term challenges of shifting geopolitical shocks and the longer-term challenges around financing and securing a just transition, were the focus of a CERAWeek session featuring Jan Laubjerg, Global Head of Natural Resources at HSBC, alongside Amos Hochstein, Senior Advisor for Global Energy Security, United States Department of State, and Carlos Pascual, Senior Vice President, Global Energy and International Affairs, S&P Global.
Investing in Tomorrow's Energy Infrastructure
At this year's CERAWeek energy conference, Gerry Keefe, Head of Global Banking, Americas, HSBC, joined a panel to explore what tomorrow's energy infrastructure will look like. The importance of alternative fuels to the energy transition, the immense capital investment needed, and how innovative financial products like FAST-Infra will help close the gap, were all key takeaways.