HSBC has today sent shockwaves through the Asian banking sector as it announced a new commitment to end coal financing.
This is big news – and a massive win for shareholder power.
The new commitment comes as part of a special resolution tabled by the bank, to be voted on at its AGM on 28 May 2021.
It is a direct result of the huge pressure put on the bank earlier this year when ShareAction, together with 117 individuals and 15 institutions representing $2.4 trillion in assets, filed a shareholder resolution at HSBC – Europe’s second largest provider of financing to the fossil fuel industry.
What we called for
As part of our resolution, we asked the bank to publish a strategy and targets to reduce its exposure to fossil fuel assets – starting with coal – on a timeline aligned with the Paris climate goals.
Whilst well-known for its work on sustainable finance, HSBC had historically been slow to take action to curb its exposure to coal and other fossil fuels.
What HSBC has delivered
The resolution put forward by HSBC commits the bank to do a number of things.
Firstly, it commits itself to publish and implement a policy to phase out the financing of coal-fired power and thermal coal mining in the EU and the OECD by 2030, and other regions by 2040.
Since the Paris climate agreement was signed, HSBC has provided billions of dollars to the coal industry. In fact, it ranked 15th largest coal financier globally, and fourth in Europe, accroding to RAN.
Its financial support to coal power companies was 3.5 times higher in 2019 than it was in 2016.
HSBC has a huge role in Asia. Today’s announcement will send shockwaves to the Asian banking and coal sectors.
It is an important step change for the bank.
HSBC has also committed itself to implement a strategy to align its provision of finance across all sectors with the goals and timelines of the Paris Agreement.
This will start with two of the most high-carbon sectors, the oil and gas and power and utility sectors.
What’s more the bank will use 1.5C pathways that are not overly reliant on negative emissions technologies. To our knowledge, this is the first time that a mainstream bank speaks about the risks of negative emissions technologies in such a way.
What’s next for the bank – and its investors
In recognition of the important step HSBC has taken – and the fact it has addressed many of our key concerns, we, along with our co-filers, have decided to withdraw our shareholder resolution from the ballot this year.
But our work is not done.
Given that it is put forward by the bank itself, the special resolution is most likely to pass. But we still need investors to vote for it!
Furthermore, the bank has committed to publish its new coal policy and provide further detail on its climate strategy by the end of 2021.
The next eight months are critical.
At the end of the day, what matters most is that HSBC follows through on its commitments in a way that reflects the urgency of the climate crisis.
This should entail taking a tough stance on coal developers.
In 2015, Christiana Figueres, then head of the UN Framework Convention on Climate Change (UNFCCC), warned: “there is no room for new coal”.
Angel Gurría, Secretary-General of the OECD has called new coal-fired power plants “the most urgent threat to our climate”.
Today, HSBC publicly recognised that the expansion of coal-fired power is incompatible with the goals of the Paris Agreement.
This is a powerful statement from a bank that has provided more than $15 billion in financing to coal developers between October 2018 and October 2020, according to the GCEL.
Given this, how can it justify financing coal developers going forward?
HSBC should also commit to help clients develop, publish and implement coal phase out plans in line with its 2030/2040 timelines by a specific date.
Given its significant presence in Asia, HSBC is in prime position to help its clients to leapfrog coal and get ahead of the game.
The Paris Agreement is clear that the emissions curve has to be bent “as soon as possible”.
Those companies that quickly move out of fossil fuels will be better positioned in the long run.
Finally, HSBC needs to be clear that it will withdraw financing for companies that engage in Paris misaligned activities.
This is something that HSBC has been more reluctant to do in the past – but will be a true test of the bank’s commitment to phase out from coal.
Investors must continue to turn up the heat
A recent analysis by DeSmogUK showed that 80 per cent of board members at the UK’s five biggest banks have current or past ties with polluting industries.
In the case of HSBC, this includes Jackson Tai, who is a past director of Singapore Airlines and CA100+ company Royal Philips NV (until 2019), and an investment banker at the world’s largest fossil fuel financier, JP Morgan, to name but a few.
It also includes Irene Lee, a former director at coal, oil, and gas and industrial metal company Nobel Group and Cathay Pacific and former employee at top fossil fuel financiers such as Commonwealth Bank Australia and JPMorgan Australia.
… And the list goes on!
How can we possibly expect these directors to make difficult yet necessary decisions on fossil fuels given their close ties with these industries? They need to hear from investors and other stakeholders?
Together with the 15 institutions who filed the shareholder resolution with us, we have already made it crystal clear to the board that if HSBC fails to produce a robust climate strategy by the end of 2021.
We are ready to take further action next year if we are unsatisfied with the bank’s progress.
We’ll be watching.
Read our Press Release >> Shareholder campaign secures HSBC coal phase out
Read the Investor Statement >> Letter to HSBC CEO Noel Quinn and Chair Mark Tucker