HSBC reviews green due diligence

May 10, 2007
ThursdayHSBC reviews green due diligence
BYLINE: Cameron Dueck
SECTION: BUSINESS; Pg. 1LENGTH:
HSBC Holdings is reviewing its environmental due diligence after beingaccused of breaking its own heavily advertised policies by sponsoringthe Hong Kong listing of Malaysian timber company Samling Global.The review is being conducted by Swiss green group Tropical ForestTrust, according to executive director Scott Poynton.It will look at HSBC's prohibited lending clauses, including one thatspecifies the bank will not finance companies involved in logging in"primary tropical moist forests" - better known as rain forests - orillegal logging.Cheryl Yong, a spokeswoman for Samling, said yesterday the companyindeed logged in a "primary tropical moist forest" in Sarawak,Malaysia, although she insisted it did so legally in areas intended formanaged harvests.HSBC, along with Credit Suisse and Macquarie Securities, helped Samlingraise HK$2.18 billion in an initial public offering in March amidcriticism that the timber company's activities were things HSBC haspromised not to support. The three banks are estimated to have earnedHK$142 million from the offering.HSBC is a member of the Tropical Forest Trust, which helps constituentcompanies work in the forestry sector in an environmentally correctway."I wouldn't say it's a review of Samling and their IPO process. It'sjust to say, look, you came under some criticism for that, let's lookat how you can implement your guidelines more broadly," Mr Poyntonsaid."They've got to try to find themselves in a position so that it doesn'thappen again, and that's why we're undertaking this."HSBC has in recent years preened its image as a "green" bank, which iswhy it has come under greater pressure over Samling's listing than thetwo other arrangers.While it would not discuss the review, HSBC in a written statement saidit was "prepared to deal with customers provided they are committed toachieving ? independent [environmental] certification and are followinga credible, time-bound action plan to achieve certification".However, in January, a Samling subsidiary in Guyana had itscertification from the Forest Stewardship Council - a group toauthenticate sustainable logging - suspended after an independent auditfound "major nonconformities".Samling said the first time it was notified by a green group directlyabout their accusations was when staff flew to Zurich to meet on May 3with Bruno Manser Fonds (BMF), a Swiss campaigner for tropicalrainforests. The firm has also invited environmental groups to visitits logging sites in Guyana."This is part of our policy to be transparent ? we are open to scrutinyof the public, not only the [non-governmental organisations]," Ms Yongsaid. "We're trying to do the right thing."Credit Suisse arranged the meeting with BMF, which has demanded thebank pay US$10 million in "compensation" to communities it alleges wereharmed by Samling's activities.Credit Suisse, which declined to comment yesterday, has maintainedSamling had not broken any laws and the listing did not violate any ofthe bank's internal policies."Realistically, we hope they would drop Samling as their businesspartner, and I'm confident this can happen if we keep the pressure up,"said Lukas Straumann, a director of BMF.