Shareholder power has paid off.
Today, HSBC made new climate commitments, to phase down its financing of fossil fuels in line with what’s required to limit global temperature rise of 1.5C.
This was a result of continued engagement with the bank from HSBC’s investors.
It shows the power of persistence.
What new commitments has HSBC made?
In its statement, HSBC acknowledged the findings of IEA’s Net Zero Emissions by 2050 report, which made clear that net zero emissions means no new fossil fuel expansion.
HSBC must now incorporate these findings in its oil and gas policy, which it has committed to updating by the end of 2022.
This will be an important step.
Banks’ financing of oil and gas is becoming an increasing topic of interest for investors.
And our recent analysis showed HSBC has the highest exposure to oil and gas expansion out of the top 25 European banks – making it an important area of focus.
HSBC will also update its coal policy by the end of 2022.
This is a big win for investors. HSBC only released a new coal policy in December 2021.
However, both us and others found the policy to contain significant loopholes that could allow the bank to continue to finance the dirtiest fossil fuel of them all.
On top of this, HSBC has committed to updating the scope of its fossil fuel targets to cover capital markets. This represents the bulk of its financing to the fossil fuel sector.
This is where a bank raises money for a client from investors. And it represents over 50 per cent of the financing that Europe’s top banks are providing to oil and gas expanders.
It’s a much-needed area of focus and one that we’ve been putting pressure on HSBC to do for some time.
HSBC must now back up its commitments with action
Commitments are great but it’s how you act on them that’s the true test of success.
Many of HSBC’s commitments are procedural by nature. The focus must now be on operationalising and implementing them in a way that is robust, science-based, and in line with or exceeding leading practice in the sector.
This is especially important as HSBC remains one of the main supporters of companies that are making a mockery of the climate crisis, such as Saudi Aramco and ExxonMobil.
These companies have no plans to stop expanding their oil and gas businesses, putting profit over people and planet.
A failure to get this right will leave HSBC exposed to important financial, regulatory, and reputational risks.
It could also present important systemic risks to investors and society as a whole.
HSBC is still Europe's third-largest fossil fuel financier and the top provider of financing to oil and gas expanders.
Now is not the time to take the pressure off – and investors are not holding back.
11 investors including ACTIAM, Brunel Pension Partnership, Friends Provident Foundation, and Man Group have written a letter to Noel Quinn and Mark Tucker at HSBC, setting out their expectations for its upcoming policy updates.
The letter calls on HSBC to set a phase out date for unconventional oil and gas and stop financing new oil and gas projects.
It also asks that HSBC tighten its coal policy to extend this to its asset management arm. As well as set core red lines for assessing clients’ transition plans.
HSBC still has a long way to go to have a climate strategy in line with leading practice.
We urge investors and the public to keep up the momentum in campaigning for this big bank to change.
Shareholder power won these commitments
It has been a long road to where we are today.
After years of engagement with HSBC through meetings, research, and AGM questions, shareholders – coordinated by ShareAction - first filed a climate resolution at HSBC in 2021.
In response, HSBC filed its own resolution and committed to phase out coal financing - and publish a new coal policy.
With this commitment secured, we collectively agreed to withdraw our resolution. But we warned we’d be back if HSBC didn’t live up to the spirit of the resolution.
And with significant loopholes – the policy released in December failed to do this.
Loopholes matter. Particularly when dealing with a systematically important bank like HSBC. Its financing and investment decisions will influence whether we’ll meet the goal of the Paris Climate Agreement or not.
And it broke the red lines of the shareholders.
True to their word – the shareholders filed a second resolution at HSBC earlier this year.
We aimed to hold the bank accountable to its own promises.
This couldn’t have happened without the support of our coalition of institutional investors.
But it wasn’t just big investors who took a stand. 108 retail shareholders - ordinary people with one or more shares in HSBC – also joined us to demand more from the bank.
Continued engagement secured these further commitments – and we have therefore again withdrawn our resolution from the ballot
But like before will be watching closely.
HSBC must fulfil its promises. And it must show a real commitment to change.
We will be demanding more from the bank than ever – and will not allow this to be a greenwashing exercise.
Now, more than ever, the bank must back up its promises with action.
And investors must continue to engage proactively – and, with us, be the watchdogs to ensure HSBC take steps towards creating lasting change.
Anything less is unacceptable.