About Alan Smith
Alan Smith is Senior Advisor - Climate and ESG Risk Management, HSBC. He is a standing attendee of HSBC’s Climate Business Council, which develops the Group’s sustainable finance and climate risk management strategy; and of HSBC’s ESG Steering Committee. He is an advisor to the Co-Chairman of The Coalition for Climate Resilience Investment, a flagship COP 26 Initiative which is a multi-industry, multi-region, public/private coalition, to produce the necessary solutions and generate the necessary credibility and system buy-in to transform the approach to building climate resilient infrastructure investment.
Alan has worked with HSBC for 26 years in a variety of senior finance, risk and capital management roles in London and in Saudi Arabia. Prior to HSBC, Alan, a Fellow of the Institute of Chartered Accountants, worked and qualified with KPMG London.
After twenty-six years in a variety of risk, investment banking and finance roles at HSBC, Alan Smith, Senior Advisor on Climate and ESG Risk Management, explains how he is leveraging his experience to advise HSBC’s senior management on managing the opportunities and risks of the bank in its transition to net-zero emissions.
How did you come to be advising HSBC on its risk strategy for sustainability?
My journey to this role is both professional and personal. In early 2020, Pam Kaur, HSBC’s new Group Chief Risk Officer asked me to shape the build out of our climate risk management capabilities. Developing our strategic approach to climate risk flowed naturally from my previous roles in enterprise-wide risk because climate risk impacts every single risk within our taxonomy. In one of my previous roles, I also oversaw the Group stress-testing programme and scenario capabilities which gave me a big-picture
understanding of the HSBC Group and how to model changes which may affect it. From a personal perspective, I like to tell people that I was born into climate change! I come from the Caribbean which is at the front line of climate impacts and because my dad was at the time of my birth a meteorologist with the Caribbean Meteorological Service, he spent his time plotting hurricanes and weather patterns throughout the region. I learned early-on that the choices we make about how we live are intertwined with the Earth’s climate.
I learned early-on that the choices we make about how we live are intertwined with the Earth’s climate.
How is HSBC helping its customers transition to net-zero?
Our customers must be central in our climate strategy and it is essential that we support them in the journey to the low carbon world. The bank articulated our very ambitious net zero strategy last year in our Climate Plan. HSBC expects to provide between $750 billion and $1 trillion in financing over the next decade to enable our customers to execute an effective and sustainable transition. We will particularly work with those in sectors we have assessed as posing higher emissions risk. We see it as being responsible to work with our clients, helping them to articulate and execute their transition plans to achieve net-zero by 2050. How we execute our own Climate strategy is of considerable interest to all of our stakeholders. As an important part of our commitment and transparency on that front, at our May 2021 AGM we will be proposing a Special Resolution on Climate Change which sets out the next phase of detail of HSBC’s strategy to support its customers on the transition to net zero carbon emissions.
What tools are you using to address the challenges of climate change risk?
By working with the front line to collect insights on our client’s transition risk plans and needs, we can help our teams articulate climate risk appetite and also better understand our customers’ requirements. We are developing the capability to identify and understand the climate risk profile of our balance sheet – at the portfolio, sector, customer and transaction level in a way which will equip us to make the right risk management decisions and allocate capital in a disciplined manner. Acquiring the right data to assess the risks of climate change is a big challenge: historical data does not tell us all we need to know. It will therefore be critical to use climate scenario analysis as an essential strategic and risk management tool. We are building the data infrastructure to provide us with the more granular information necessary to provide deeper insight into climate change risks. It will also be important to build models that pull together the scientific, economic and financial dimensions of climate risk in a coherent way to enable us to make evidence based, data driven decisions. All of this will have to be governed and disclosed properly, two other key building blocks of effective climate risk management.