Executives from both companies told Reuters that HSBC, the largest bank in the United Kingdom, has teamed up with Google to invest in rapidly expanding climate technology companies that are responsible for some of the most promising solutions to the world’s climate crisis.

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

Participants in the scheme go through a validation procedure 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 innovation and sustainable finance at HSBC, which supplemented the bank’s own evaluation of possible new “venture debt deals,” in which a lender offers debt financing for businesses that are intrinsically riskier.

The COP28 climate negotiations in Dubai in December were dominated by scaling technology that can assist the corporate world transition more quickly to a low-carbon economy. This is an important component of most banks’ attempts to lead a worldwide push to decrease emissions.

However, according to PwC statistics, financing to the industry declined 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.

A year after HSBC acquired Silicon Valley Bank’s (SVB) UK business, a failed digital lender, in a deal mediated by the UK government in an effort 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 established lenders had a tendency 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, would depend on technology that is not yet at scale.

Six months after purchasing SVB UK, HSBC announced that it will try to invest climate innovation businesses 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 towards a more audacious aim of bringing 1.3 million customers up to net zero by 2050.

The 30 participating companies offer cloud-based technology solutions that handle data on sustainability issues to 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.

With order to aid with the shift, HSBC would eventually arrange introductions between current clients and climate tech companies, he continued.

In addition to announcing the relationship with Google, HSBC announced that it has 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 conditions 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.”

(Adapted from BusinessTimes.com.sg)