London-based financial institution HSBC will instantly cease lending and underwriting for brand spanking new oil and gasoline drilling initiatives, the financial institution introduced Dec. 14, making it the primary giant multinational financial institution—and top-tier funder of fossil fuels—to undertake such a coverage.

The coverage change follows a yr of strain from activist shareholders, and raises the bar for different main banks which have set long-term targets to decarbonize their lending however have thus far been reluctant to shut the purse strings for oil and gasoline producers.

“HSBC’s announcement is groundbreaking and can ship shockwaves to governments and fossil gasoline giants,” mentioned Jeanne Martin, head of the banking program at ShareAction, an advocacy group that spearheaded climate-related shareholder resolutions at HSBC and labored with the financial institution on its new oil and gasoline coverage.

HSBC will proceed lending to fossil gasoline corporations

To be clear, the coverage solely impacts project-specific finance, the place an oil and gasoline firm seeks a mortgage for a selected new drilling undertaking or infrastructure to help it. HSBC will proceed to lend and supply monetary companies to grease and gasoline corporations, together with these with plans to increase drilling, on the common company stage, i.e., finance not designated for one explicit undertaking. On common throughout European banks, 92% of finance for oil and gasoline corporations got here on the company stage, with solely 8% for particular initiatives, in line with ShareAction. HSBC is the highest European financier of oil and gasoline corporations, offering $59 billion in lending, underwriting, and different financing from 2016 to 2021.

Nonetheless, reducing off undertaking finance “sends a transparent sign to its shoppers that the financial institution is shedding its urge for food for this sort of exercise,” Martin mentioned. And it might be a stepping stone to extra wide-reaching restrictions; all main European banks now have some restrictions on corporate-level financing for coal corporations, a broad shift that additionally began with project-level finance.

HSBC can nonetheless clear up its promoting

There’s nonetheless loads HSBC can do to enhance on its local weather insurance policies, Martin mentioned. In October, UK officers banned a few of the financial institution’s adverts for making claims that had been deceptive or greenwashing. And though HSBC has mentioned it is going to require its company shoppers to ship net-zero transition plans, it hasn’t mentioned the way it will assess these plans or whether or not it could sever ties with shoppers whose plans are insufficient.

Nonetheless, if HSBC can no less than goal undertaking finance, there’s no purpose why JP Morgan Chase, Financial institution of America, Citi, and different main fossil gasoline financiers can’t comply with swimsuit. And the costlier and elusive finance for drilling turns into, the extra strain oil and gasoline corporations will really feel to hurry up their shift to lower-carbon enterprise fashions.

“The truth that HSBC might make this dedication makes it very onerous for different banks to not make comparable commitments,” Martin mentioned.