Inside HSBC’s bet on the “mega transition”: Let's Talk Energy Q&A

In this week’s edition of Let’s Talk Energy, Natalie Blyth, Global Head of Sustainable Finance & Transition at HSBC, joins Noah to talk about where the bank sees the best bets as the energy transition evolves. AI and data centers are reshaping power demand, but the real test, she says, lies in hard-to-abate industries. Stream the full episode now: Inside HSBC’s bet on the “mega transition”

NB: HSBC has organized its transition strategy around three drivers — what are they, and how do they fit together? 

Natalie Blyth: “It's a strategy we've had going for a little while, and then we revised it and refreshed it about a year ago. But the purpose of it is nothing less than to put HSBC at the center of the next decades of growth and transition as we navigate this rewiring. The three drivers: Driver one is to make sure that we are leading on some of these critical transition ecosystems. They're really fast growing. To put that into perspective, we looked at 20, shrank them to 10, and then consolidated to about four. Clean power is one of them. Electrification is another, and then the digital infrastructure, data centers, AI is the third one. Those three really move the needle for humanity and the transition. Driver two, and you’ve got to think of these three as Venn diagrams overlapping, is - we've been a bank for 160-odd years, so we bank a lot of the hard-to-abate sectors. So lean in, look at and work with all our clients, meet them where they are, and then help them transition to net zero. And then driver three is be nothing less than the bank of choice, the kingmaker for the climate and deep tech startups, and you can see that these are all reinforcing each other. They're interwoven, and so to take those climate tech companies, we need to scale them up. We need to de-risk them. We need to finance them. So we need to find them customers, and those are the clients in drivers one and two. In fact, they could actually become a unicorn in driver one themselves." 

NB: Can we really electrify everything at the pace this electricity demand supercycle requires? 

Natalie Blyth: "No, you're absolutely right. Electrification is still the right direction of travel. It's still what we need to achieve. But what has changed is that tremendous demand, in particular coming through from the supercycle in data centers and AI. I think the demand coming through from that subsector alone is double, even more than double by 2030 what it was only a few months ago. I think you're talking about 945 terawatt hours that are going to be needed. I mean, this is just huge. But what we have to do is, in a responsible way, still electrify what we can, recognizing that the demand is also changing. We've got to do both in parallel. Not easy." 

NB: What's changed in how your clients think about sustainability and the transition over the past 18 months? 

Natalie Blyth: "And you're seeing the sort of commercialization and the commercial outcomes become much more sort of central to the strategy and the sustainability and transition component of corporate strategies and investor strategy becoming core, and I'd say in the last 18 months I've really seen that happen, and some of our pulse surveys have also showed that. So our clients are now saying, I mean, some of these stats are quite incredible. We are talking 99, 95, 90% of over 1,600 corporates and over 500 institutional clients in over 12 markets saying that sustainability and transition is now essential for competitive advantage. It's essential for sort of long-term profitable growth, and it's now getting embedded as a core part of the strategy. So when it makes commercial sense, it flows and it happens." 

NB: What's different about a “bankable” project today compared to what you would have wanted to see three or four years ago? 

Natalie Blyth: "I think it is different, and I think again, we probably don't look at a sort of a project on a one-off basis. Can we get this one through? But is it repeatable? Is it scalable? You slice and dice all the risk components, but you've really got to sort of zoom in on for that particular situation what is the risk that really matters. And again, frequently coming down to sort of commercial reality.  

NB: Is capital still willing to back the decarbonization of hard-to-abate industries like steel and cement? 

Natalie Blyth: "A big yes to that. This is actually huge for us. It's that driver two, and in reality, the great transition is won or lost in these hard-to-abate industries. So it's not a case of just leave them and move on to some sort of new world. We have to bring these new industries, and it is possible. So another deal that we did was SSAB, which is a Swedish steel company, introducing the electric arc furnace. It's a €2.3 billion deal amongst many banks - we were one - but that reduced the carbon footprint 90% of that actual facility, and of the whole of Sweden - 7%." 

NB: If you had to name one thing that gives you hope and one thing that keeps you up at night about the transition, what would they be? 

Natalie Blyth: "Well, the concern is this is just too slow. We are not on track for an orderly 1.5 [degrees Celsius]. Everybody knows there's a massive overshoot. So it's too slow - that is my concern. My positive is the strategy that we're a year in and now is definitely working. So we need everybody to lean in, and if we can all share the successes that we've had, if we can all take an ecosystem and crack it, then we can get back on track." 

Stream the full episode now: Inside HSBC’s bet on the “mega transition”, with Natalie Blyth, HSBC