Public, Private Tactics Needed to Score HSBC Win

NGO, investor influence forced global bank to re-evaluate thermal coal policy.

Investors used public and private engagement tactics to ensure HSBC updated its underwhelming net-zero transition plan before it was subject to a shareholder vote at the global bank’s 2021 AGM.

“When asset owners pool their knowledge, resources and assets together in this way, they really can move the dial,” said Mais Callan, Senior Responsible Investment Manager for UK-based auto-enrolment workplace pension scheme Nest (£10 billion AUM). Callan was speaking at the Pensions and Lifetime Savings Association’s (PLSA) inaugural ESG Conference this week.

The updated plan was put to a vote during HSBC’s annual general meeting (AGM) in May and supported by a majority of shareholders. This followed the decision of non-profit responsible investment campaign group ShareAction to withdraw a counter-resolution, which had been backed by a US$2.4 trillion coalition of investors, including asset manager Amundi and publicly-listed hedge fund company Man Group.

While ShareAction and its co-filers ramped up the public pressure leading up to the AGM, Nest was privately putting pressure on the global bank to update its net-zero transition plan before ShareAction’s resolution was publicly filed, said Callan.

“We didn’t need to go public with our engagement efforts at the time, it was all done privately,” she said.

When HSBC published its first net-zero plan, both Nest and ShareAction were unimpressed, Callan said, noting that the bank didn’t provide enough clarity as to how it planned to actively reduce emissions or scale back its financing of the fossil fuel industry.

ShareAction contacted Nest in December 2020, informing the pension scheme of its intention to file a resolution and asking Nest to join its coalition.

Nest contacted HSBC privately, asking them to cooperate with the NGO and reach a common consensus on a greener transition plan, Callan said.

“We thought that having two separate resolutions on the ballot would be confusing for shareholders […] we didn’t want to risk diluting the vote and not coming out with the right outcome,” she explained.

However, no immediate action was taken by the bank and ShareAction filed its resolution in January 2021, bringing public attention to HSBC’s plan.

Also speaking at the event, Helen Price, Stewardship Manager at Brunel Pension Partnership (£30 billion AUM), said that Brunel was part of the investor coalition backing ShareAction’s resolution.

Public investor coalitions are a highly effective escalation tool which can force companies to make changes, she said. “It’s easier to demand change when we know we’re not the only shareholder raising this issue with the company,” Price added.

The combination of public and private pressure from investors forced HSBC to submit. The bank entered into talks with ShareAction.

This resulted in ShareAction withdrawing their resolution in March, with HSBC updating its own plans to address the non-profits concerns. On 28 May, the new ‘special resolution’ became binding, having received more than 75% of the shareholder vote. The bank is now committed to phasing out finance for the coal industry by 2040, according to guidelines set out the United Nations Secretary-General António Guterres.

However, pension schemes often have a number of assets that are intermediated using asset managers, meaning that it’s the asset manager with the voting powers rather than the asset owner, pointed out Richard Butcher, PLSA Chair.

In these cases, the asset owner must put pressure on the asset manager “to make sure they know they’re being monitored and that they’re expected to align with the asset owner’s policies and vote accordingly,” he said.

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