Major HSBC shareholders are today calling on the global bank to restrict its dangerous and excessive financing of the coal industry.

In an action coordinated by responsible investment charity ShareAction, a group of HSBC shareholders with over $1tr in assets either under management or stewardship* have sent a letter to the CEO of the global bank, John Flint. The group – which includes Schroders and Hermes EOS, a leading stewardship provider – are asking the bank to strengthen its coal policy by ending finance to coal-reliant companies and by excluding future financing of coal projects in certain emerging markets.

Investors could face the knock-on effects of investing in banks still tied up in coal, as legislation clamps down on fossil fuels and the energy mix moves towards cleaner energy sources.

Unlike many of its peers, such as Standard Chartered and Barclays, HSBC has failed to institute a global exclusion policy for coal power project finance. Instead, HSBC’s policy allows it to continue financing coal power projects in Bangladesh, Vietnam and Indonesia. ShareAction has been campaigning on this since HSBC’s AGM last year.

Similarly, HSBC has so far failed to take a prudent stance on corporate finance – for example, in the form of general loans to companies – enabling the bank to continue indirectly financing and underwriting companies that are highly reliant on coal.

As such, the group, which also includes EdenTree, has written to HSBC asking that they adopt:

• A prohibition of project finance to new coal mines and coal-fired power plants anywhere in the world, including Indonesia, Bangladesh and Vietnam;
• A prohibition of general corporate financing, underwriting and advisory services to companies that are highly dependent on coal mining or coal power;
• A clear, timebound plan to phase out existing exposure to coal-related assets.

Extensive research has shown that there is a clear path to renewables in Indonesia, Vietnam and Bangladesh. Yet by financing coal power sector expansion in these three countries, HSBC is facilitating the lock-in of high-carbon infrastructure and avoidable emissions; and failing to support these countries in the transition to a low-carbon economy.

It is widely acknowledged that no new coal plants can be built anywhere to keep temperature rises to well below two degrees of warming.

This action follows several successful investor engagements on climate change, which saw Glencore most recently agreeing to limit its coal production.

Sonia Hierzig, Senior Projects Manager at ShareAction, said: “Coal’s time is up. The time for forceful investor action on climate change is now. Whether targeted at high-carbon companies or at the financial institutions keeping them alive, investor engagement is working. It is time HSBC listened to its shareholders and faced the facts: coal poses a climatic and financial risk too great to bear.”

Roland Bosch, Associate Director at Hermes EOS, said: “We expect that financing new coal-fired power will prove to be highly risky, given the increasing competitiveness of renewables, and is incompatible with the goals of the Paris Agreement. Although HSBC has not financed any new coal-fired power plants since the release of its new energy policy, we want to see the bank evolve its policy to rule out all investment in coal and instead to focus on financing low-carbon energy across emerging markets.”

Esmé van Herwijnen, Responsible Investment Analyst – Climate Change Lead at Edentree, said: “We support urgent moves that lead to HSBC strengthening its policy on new coal investments. Alongside some of its peers such as Barclays and ING, we believe the time has come for HSBC to institute a global coal exclusion policy that makes a firm commitment to end the financing of coal reliant projects within a clearly defined time frame. The IPCC has made it clear that there can be no future for coal in a 1.5-degree scenario and, as shareholders, we are urging HSBC to show leadership in this vital area”

Jack Bertolus, Research Coordinator at Market Forces, said: "Harvard University researchers project that by 2030, pollution from coal-fired power plants could result in 43,620 excess deaths in Indonesia and Vietnam every year. The Executive Director of the International Energy Agency has warned that 'we have no room to build anything that emits CO2 emissions.' Yet HSBC continues to actively support pollution, from a controversial coal port in Bangladesh to coal-fired power stations in Vietnam. The bank must recognise that developing countries have as much as right as their developed counterparts to clean energy and clean air. HSBC should immediately rule out all funding to new coal, no matter the location."

*Includes Hermes EOS total assets under advice $496bn, as at 31 December 2018

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• For more information, please contact Beau O’Sullivan at beau.osullivan@shareaction.org or +44 203 475 7859
• To see a full copy of the letter, click here.
• Public signatories include: Schroders, Hermes EOS, Edentree, and Ethos Foundation. Ethos is not a shareholder in HSBC.
• About ShareAction: ShareAction’s vision is a world where ordinary savers and institutional investors work together to ensure our communities and environment are safe and sustainable for all. Our mission is to unleash the positive potential of the mainstream investment system. To do this: We’re building a movement for change in our investment system by working with people inside and outside the industry to challenge the status quo; We’re unlocking the positive potential of the investment system by working with large and small investors to change unsustainable corporate practices; We’re reforming the investment system by advocating for change in the policies, governance, and incentives that drive behaviours in the investment industry.