HSBC and Google Work Together to Finance and Expand Climate Technology Companies

The largest bank in the United Kingdom, HSBC (HSBA.L), has partnered with Google (GOOGL.O) to finance rapidly expanding climate technology companies that are responsible for some of the most promising solutions to climate change in the world, according to executives from both companies.

Today, HSBC and Google Cloud announced the formation of a new alliance with the goal of financing and supporting companies that offer resilience and climate mitigation solutions.

As per the agreement, HSBC will try to finance companies that the US tech giant hand-picks to be a part of its Google Cloud Ready-Sustainability program.

Through the new partnership, companies participating in the Google Cloud Ready – Sustainability (GCR-Sustainability) validation program will have access to HSBC’s specialized climate tech finance team to discuss venture debt financing options. GCR-Sustainability was introduced in 2022 and features companies that offer solutions on Google Cloud to assist governments and businesses in accelerating their sustainability programs and initiatives. These solutions include carbon emission reduction, value chain sustainability improvement, and the processing of ESG data to help identify climate risks.

The companies declare that the new partnership aims to achieve two major objectives: first, it will increase the number of partners in the GCR – Sustainability program over the next two years; second, it will give HSBC access to financing opportunities, as it announced last year that it would like to allocate $1 billion to support climate tech startups around the world.

Members of the program go through a validation process where Google evaluates the effectiveness and quality of the technology under development as well as its uptake by users.

“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.”

Google’s due diligence offered “a certain comfort,” according to Martin Richards, global head of climate tech and sustainable finance at HSBC, which complemented the bank’s own evaluation of possible new “venture debt deals,” in which a lender provides debt financing for inherently riskier companies.

The focus of the COP28 climate talks in Dubai in December was on scaling technologies that can help the corporate world transition to a low-carbon economy more quickly. Most banks view this as a critical component of their efforts to lead the global drive to reduce emissions.

However, according to PwC data, financing to the industry fell precipitously in 2023 as a result of lenders’ and investors’ fears over 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

A year after HSBC acquired Silicon Valley Bank’s (SVB) UK unit, a failed tech lender, in a deal mediated by the UK government to prevent a startup bubble from exploding, Google has partnered with its cloud computing division.

For policymakers, venture debt availability and impact continue to be major concerns. Although SVB was a major participant in the market, more mainstream lenders tend to avoid it due to capital risk concerns.

Nearly half of the emissions reductions required to achieve net-zero emissions by 2050, according to research, from the International Energy Agency, will depend on technology that is not yet at scale.

Six months after purchasing SVB UK, HSBC announced that it would try to fund climate tech companies by $1 billion by 2030 in a variety of areas, such as electric cars, battery storage, and sustainable food systems.

According to Richards, HSBC was “well ahead” of internal goals in achieving that objective. He expressed optimism that the collaboration and the introduction of HSBC Innovation Banking would hasten the company’s move toward a more audacious goal of bringing 1.3 million customers up to net zero by 2050.

The initiative’s thirty companies, which open a new tab, offer cloud-based technology solutions that process sustainability risk data and assist customers in lowering their carbon emissions.

“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.

To aid in the transition, HSBC would eventually arrange introductions between current clients and climate tech companies, he continued.

In addition to announcing the partnership with Google, HSBC announced that it had signed the venture debt agreement for the first time with LevelTen Energy, a startup that operates a marketplace for buyers and sellers of renewable energy.

The terms of the loan were not revealed.

“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.”

Along with the announcement of their new partnership, HSBC and Google also revealed that LevelTen Energy, a provider of renewable transaction infrastructure that links and supports buyers, advisors, and sellers of renewable energy, would receive the partnership’s first venture debt package. Apart from its certification in GCR-Sustainability, LevelTen collaborated with Google last year to create a more efficient Request for Proposals (RFP) procedure for renewable Power Purchase Agreements (PPAs). This reduced deal execution and negotiation times by approximately 80% and allowed for a faster rollout of clean energy.