HSBC Holdings Plc told Reuters on Thursday it would stop financing thermal coal expansion from the fund with immediate effect, marking an acceleration of a broader commitment it made last year.
Thermal coal, a cheap energy source widely used across the Asian markets where many of HSBC’s clients are based, is one of the fossil fuels most responsible for climate-damaging emissions.
The banking sector has been slow to commit to no longer financing energy production. Standard Chartered, HSBC’s competitor in emerging markets, said earlier this year that it would end all direct coal financing for customers by 2032.
HSBC said last December that it would reduce exposure to thermal coal financing across all its businesses, including asset management, by at least 25% by 2025 and 50% by 2030, although non-EU or non-OECD-based clients may be financed globally by 2040. phase out.
In a new 10-point plan, HSBC Asset Management, which oversees about $600 billion in assets, said it would immediately stop investing in the listing or initial debt issue of any company engaged in thermal coal expansion.
HSBC estimates that there are more than 300 companies worldwide where more than 10% of revenue is linked to fuel. The Global Coal Exit List, which tracks financial firms’ ties to the coal sector, said HSBC’s fund arm exposure was $3.4 billion at the end of November.
Erin Leonard, head of sustainability at HSBC Asset Management, said in an interview that the number of companies in the bank’s investment portfolio that have so far confirmed plans to expand exposure to thermal coal is “relatively small”.
HSBC said it will engage all listed companies in its actively managed portfolios with more than 10% revenue from thermal coal by next year.
By the end of 2030, the group’s active portfolios will not hold any listed securities of companies dependent on coal for more than 2.5% of revenues in the European Union or OECD markets; And it will expand to all markets by 2040.
By 2025 HSBC aims to start engaging all companies holding shares above the 10% threshold, including companies in passive funds.
According to HSBC, for companies in active funds with more than 10% revenue exposure to thermal coal, all initial public offerings and initial debt issuances will be subject to “increased due diligence” on the company’s plan to transition to net-zero.
HSBC said in its 2021 annual report that the bank’s exposure to thermal coal loans was $1 billion, or 0.2% of its total wholesale loan book.
In holding boards of companies with significant thermal coal exposure to account, HSBC said its fund companies would vote against electing board chairs at companies planning to expand production and use of thermal coal.
Chairs of companies with more than 10% revenue exposure, and those that do not provide acceptable reporting on climate risk, or where transition plans are weak after a certain period, will face opposition when re-elected.
“It’s a very public signal to the companies we invest in about our intentions and how we’re going to vote,” Leonard said.
A spokesman for ShareAction, a not-for-profit sustainable business advocate, welcomed HSBC’s announcement and called on it to set interim milestones in its engagement with companies.
HSBC also said it would stop launching index funds with more “de minimis” exposure to thermal coal, which the group defined as more than 2.5% of a company’s revenue.
For all existing passive funds, which make up a sixth of HSBC’s total assets, it will work with clients to convert to green alternatives and work with index providers to create more indices without exposure to thermal coal.
