Conservationists have heavily criticised HSBC for helping to sell £870m worth of Chinese government bonds, saying the money will be used to build vast new dams in breach of global environmental agreements.
Ecologists claim the move raises serious doubts about public promises from the banking giant's chairman, Sir John Bond, to put environmental and social responsibility at the heart of its investment and lending policies.
Beside other major investment houses, such as Goldman Sachs and UBS, HSBC has been hired by the China Development Bank to help raise €500m (£330m) from within Europe and by the Chinese Export Import Bank (CEIB) to place a further $1bn (£540m) worth of bonds worldwide.
Environmentalists condemn the deal because much of the money is expected to be ploughed into dam and river diversion schemes being proposed by Beijing. These include a $15bn plan to connect four of China's largest rivers, a project that will dwarf the controversial Three Gorges Dam.
HSBC's involvement has particularly alarmed environmentalists at WWF UK, since it and HSBC signed the world's biggest corporate conservation deal in 2002, worth $50m. A large slice of that donation - some $19m - includes an important HSBC-WWF programme to conserve freshwater supplies, particularly in China. Of that, $2m is being spent on conservation in the central Yangtze region, which WWF last month said was under greater threat from dams than any other river in the world. In a major report, WWF said large dams were causing unacceptable ecological and social damage.
A senior WWF official, Dax Lovegrove, said the campaign was now in urgent talks with HSBC about the Chinese contracts, and admitted they were worried the deals might fail to meet modern, socially responsible investment standards. "There are some unknowns here," he said.
Mr Lovegrove, though, supported HSBC's claims that many CEIB schemes were "positive projects for China and its citizens", and not solely used for damaging infra-structure programmes.
HSBC insisted that its links to the Chinese fundraising effort did not directly breach its environmental promises or undermine its "green credentials" since the bonds sale was not directly tied to any particular project, a claim seized on by conservationists.
This argument, said Michelle Chan-Fishel, of Friends of the Earth, was precisely why the bonds sale should be avoided by HSBC, since the bank would probably refuse to fund these dams directly.
"By using intermediaries as a way of raising money for these projects, the Chinese government is trying to dissipate any sense of responsibility that underwriters and investors may feel for bankrolling environmental and social destruction," she said.
Peter Bosshard, policy director of the campaign group the International Rivers Network, said that the Chinese banks failed to meet "the most basic standards for safeguarding transparency, environmental sustainability, and human rights".
Francis Sullivan, HSBC's environment adviser, said it was currently drafting a new set of corporate investment guidelines on dams and water projects, tying in with its promise earlier this year to stop investing in highly damaging forestry, paper and palm oil schemes in South-east Asia.