Europe’s largest bank has today announced it will go net-zero by 2050 at the latest but investors say its commitment lacks substance. In particular, investors are concerned about the bank’s lack of a plan to phase out its significant exposure to coal, oil and gas.
HSBC's strong exposure to Asia makes today's announcement significant. But for HSBC’s net-zero commitment to have any credibility, the bank has urgent work to do today to phase-out support to the fossil fuel industry, according to ShareAction. This should start with coal and tar sands, on an explicit timeline that is aligned with limiting climate change to 1.5C.
Jeanne Martin, senior campaign manager, ShareAction, says: “We welcome HSBC’s commitment to net zero by 2050. Since Barclays’ announcement in March 2020, net zero ambitions are quickly becoming the baseline in the banking industry. As shareholders made clear at the 2020 Barclays AGM, net zero ambitions need to be backed up by fossil fuel phase out targets to be credible. As Europe’s second largest financier of fossil fuels, we urge HSBC to commit to a global coal phase out and take immediate steps to curb its fossil fuel financing. This would leave no doubt of the bank’s commitment to net zero by 2050 – and give the world a chance to avert the worst consequences of climate change.”
HSBC is Europe’s second largest financier of fossil fuels, after Barclays, according to the Rainforest Action Network. Since the signing of the Paris Agreement, HSBC has provided $87 billion in financing to top fossil fuel companies. Between 2017 and Q3 2019 it also provided nearly $8 billion in loans and underwriting to 29 companies that are developing coal plants. Whilst the bank has often been recognised for its work on sustainable finance, an important element of a good climate strategy, it has so far been reluctant to curb its financing of the fossil fuel industry.
Last year a group of investors - representing more than $1 trillion in assets - sent a letter to HSBC’s then-CEO asking it to cease financing to companies that are highly dependent on coal mining or power. The group included Schroders, Hermes EOS and Edentree Investment Management.
In May this year, Barclays’ net zero commitment - which lacked a near-term exclusion of coal, oil, and gas - were not enough to win over 24% of shareholders. They voted for an independent resolution levied by ShareAction and investors calling for clear phase-out targets.
Nina Roth, Director, Responsible Investment at BMO Global Asset Management, commented: “Such announcements are great to indicate the direction of travel. But there is a clear need for more substance in their implementation.”
“Whilst HSBC’s announcement is detailed when it comes to pledges to provide Paris aligned finance to clients, we still need more information on what they won’t do anymore. I’m particularly thinking of their coal portfolio. With HSBC’s large presence in Asia, it will be most interesting to see what it means for the regional extractives’ portfolio.”
Esmé van Herwijnen, Senior Responsible Investment Analyst at Edentree Investment Management, commented: “I think this is a big move forward, but lacks some details. A net-zero target for a global bank like HSBC is a positive, but any net zero target should start with focusing on ceasing financing of fossil fuel projects and other environmentally destructive industries, thus avoiding and reducing emissions rather than merely seeking to compensate or offset financed emissions. It is not yet clear which option HSBC will favour and whether avoiding fossil fuel financing will be a key part of this commitment. The statement today still leaves many questions unanswered.”
Notes to editors:
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- Going net-zero for a bank means it aims to reduce to zero the carbon emissions of the companies and projects it finances in the next 30 years.
- You can compare banks’ coal policies using this tool here.