Europe

Institutional Investors Call for “Credible” HSBC Plan to Reduce Fossil Fuel Exposure

Resolution coordinated by ShareAction asks HSBC to publish strategy for aligning with Paris climate goals 

UK-listed international bank HSBC has been urged to publish a detailed plan explaining how it will reduce its exposure to fossil fuel assets by a coalition of investors coordinated by responsible investment non-profit organisation ShareAction. The resolution is backed by 15 institutional investors with a combined US$2.4 trillion in assets under management (AUM).

The group of investor co-filers includes Amundi Asset Management, Man Group and asset owners and managers across Europe.  The resolution was co-filed by almost 120 individual investors. 

According to ShareAction research, in the latter part of 2020, the bank “pumped an additional US$1.8 billion into fossil fuel companies”, casting doubt over the credibility of HSBC’s climate commitments and prompting the submission of the resolution. 

Should the resolution receive more than 75% of the votes at HSBC’s AGM, scheduled for April, the bank will be required to publish its strategy outlining short-, medium- and long-term targets to reduce its exposure to fossil fuel assets. It also encourages HSBC to “consider the social dimension of the transition to a low-carbon economy (a Just Transition) when developing its strategy”, ShareAction added.  

HSBC will need to issue a voting recommendation (and justification for it) on the resolution in its AGM papers. 

The resolution further encourages the bank to implement climate scenarios that “do not rely excessively on negative emissions technologies when developing its targets,” Shareaction said. The organisation pointed to the Intergovernmental Panel on Climate Change’s (IPCC) report which stated that large-scale CO2 removal is “unproven”. Relying solely or heavily on the technology is therefore “a major risk in the ability to limit warming to 1.5°C”.  

The resolution does not prescribe specific actions beyond outlining its strategy and targets. However, Unicredit and Credit Agricole’s coal policies have been identified as examples of best practice in the sector. 

Unicredit recently committed to phasing out its exposure to coal by 2028. The bank has asked its clients to publish “a credible plan for phasing out from the coal business by 2028” by the end of 2021. It will not do business with companies reliant for more than 25% of revenues on coal. 

“The message from the resolution is clear: net-zero ambitions by top fossil fuel financiers are simply not credible if they fail to be backed up by fossil fuel phase out plans,” said Jeanne Martin, Senior Campaign Manager at ShareAction 

The resolution’s supporting statement calls for HSBC to “introduce robust project and corporate finance restriction criteria and a 1.5°C-aligned engagement policy for its clients in high-carbon sectors. HSBC should set explicit conditions when providing financing tied to net-zero commitments, with clear timelines and milestones for reducing emissions.” 

“Five years after the Paris Agreement was signed, HSBC continues to pour billions into the coal sector, a behaviour that is at odds with limiting global warming to 1.5°C. If HSBC is serious about its net-zero ambition, it will support this resolution,” she continued. 

In January 2020, ShareAction took similar a similar stance against Barclays, which led to the UK bank becoming the first mainstream bank to commit to net-zero by 2050. Shareholders filing the HSBC resolution said they are hopeful the board votes in favour of the resolution at the AGM, in order to prompt similar results. 

In March 2019, ShareAction coordinated an open letter to HSBC asking for the bank to restrict its financing of the coal industries. Signatories included Schroders, Hermes EOS and Edentree Investment Management.  

“In October, HSBC’s board announced an important ambition: to ensure its financing activities support efforts to limit global warming to 1.5°C. Attention must now turn to implementation […] the board must be clear on its intent to withdraw financing of harmful emissions. The sooner the board sets out its strategy for delivering this, the less disruptive the transition,” said Natasha Landell-Mills, Head of Stewardship at Sarasin and Partners.  

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