AI Is Reshaping HSBC's Energy Bets--And Fossil Fuels May Lose the Spotlight

This article first appeared on GuruFocus.

HSBC Holdings Plc (NYSE:HSBC) is quietly repositioning its energy financing playbook as artificial intelligence reshapes global power demand. The bank expects oil and gas transactions to account for a smaller slice of its portfolio over time, even as total fossil-fuel lending rises in absolute terms. Julian Wentzel, HSBC's chief sustainability officer, said the shift reflects new energy systems coming on stream to meet AI's massive power appetite. Electricity demand from data centers could quadruple by 2035, and while gas and coal will continue to supply much of that growth, renewables appear increasingly set to dominate the next wave of AI-driven infrastructure.

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In its latest transition plan, HSBC trimmed its carbon ambitions to reflect this changing energy landscape. The bank now targets a 14% to 30% reduction in financed emissions by 2030, down from its prior goal of 34%. That adjustment shifts HSBC's climate alignment from a 1.5C to a 1.7C pathwayacknowledging what Wentzel called the realities of an evolving transition. The recalibration comes as the United Nations warns that current global policies could result in temperature increases of 2.8C, underlining the difficulty of meeting climate goals amid surging AI-driven energy demand.

Wentzel, who previously led HSBC's Middle East and North Africa banking arm, argued that cutting off fossil-fuel financing entirely would not support the transition. Instead, the bank aims to remain engaged with clients as they invest in lower-carbon technologies. Still, he described AI as a huge shot in the arm for clean energyone that could accelerate renewable adoption across the grid. As AI data centers multiply and reshape global power flows, HSBC appears to be threading a delicate balance: financing today's fossil fuels while preparing for an energy system increasingly defined by sustainable growth.

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