Investors and activists frustrated by HSBC’s failure to address concerns around fossil-fuel financing have joined forces to pressure the bank’s management to take action.
Fifteen European asset managers and owners, including Amundi and Man Group, have filed a shareholder climate resolution calling on HSBC to publish a strategy and targets to reduce its exposure to fossil-fuel assets.
The move, which has been coordinated by responsible investing NGO ShareAction, comes just three months after HSBC pledged to reduce financed emissions from its customer portfolio to net zero by 2050 or sooner.
Investors have been engaging with [HSBC] on coal for quite a while
Jeanne Martin, ShareAction
Chief executive Noel Quinn said at the time that the bank would look to provide up to $1 trillion of finance and investment by 2030 to support customers’ energy transition. Other aims included to “apply a climate lens to our financing decisions” and “increase our portfolio of transition finance solutions”.
However, the announcement was criticized for failing to give a timeline for phasing out HSBC’s financing to the fossil-fuel industry.
“We were disappointed with HSBC’s net-zero announcement,” says Colin Baines, investment engagement manager at Friends Provident Foundation (FPF). “It fails totally to address the material issue of fossil-fuel finance and it doesn’t have a meaningful plan with short- and medium-term targets.
“If you’re going to set a 2050 net-zero target and not adopt a transition pathway to get there, you are opening yourself up to accusations of greenwash and kicking it into the long grass.”
According to the Rainforest Action Network (RAN), HSBC was the second-largest financier of fossil fuels in the four years after the signing of the Paris Climate Agreement. Between 2016 and 2019, the bank funnelled $87 billion to projects and companies involved in the sector.
HSBC’s reluctance to commit to exiting environmentally sensitive sectors such as oil sands and thermal coal is a particular bone of contention for activists.
In March, ShareAction coordinated a letter from a group of institutional shareholders asking HSBC to take action on coal financing. A year later, the bank complied with one of the requests and closed a loophole allowing coal project financing in Bangladesh, Indonesia and Vietnam.
Unlike European peers such as UniCredit, Societe Generale and Crédit Agricole, however, HSBC has yet to accede to demands for the introduction of corporate finance restrictions for companies that are dependent on thermal coal and commitments to a coal phase-out.
“HSBC should be announcing that they’re exiting tar sands and coal now, and then unabated gas further down the line and so on,” says FPF’s Baines.
Pre-emptive action
The hope is that the shareholder resolution, which is scheduled for discussion at HSBC’s annual general meeting in April, will prompt the bank’s management to take pre-emptive action. Last year, Barclays made a series of climate commitments in response to a similar climate resolution.
“Our immediate priority is to engage with HSBC on the contents of the resolution,” says Jeanne Martin of ShareAction. “Hopefully, we can persuade them to support it and recommend all its investors to vote for it.
“We think that the ask made in the resolution is reasonable and fits very well within the net-zero ambition that HSBC announced in November.”
ShareAction is also encouraging HSBC shareholders to support the resolution. Martin says the initial response from the bank’s broader investor base has been positive.
“It has confirmed our belief that investors have been engaging with the bank on coal for quite a while,” she says.
Martin adds that, even if the resolution doesn’t pass, a vote in favour by 10% of HSBC’s shareholder base might be enough to prompt the bank to act on some of the demands made.
“What is important is the pressure on banks in our economy to take action to address the climate crisis that will be exercised by this resolution,” she says.
HSBC declined to respond directly to queries about the resolution. In a statement, the bank reiterated its “net zero by 2050” commitment and the $1 trillion figure for financing.
“As we work to set out the detail of our roadmap to net zero, we continue to positively engage with our customers, shareholders and ShareAction,” says a spokesperson.
None of the banks is really doing anywhere near enough at this point
Colin Baines, Friends Provident Foundation
Baines notes that support by HSBC for the resolution, and the implementation by the bank’s management of a meaningful transition strategy, could set a template for the wider UK banking sector.
“It would establish best practice and we could then engage with other banks to follow their lead,” he says. “There are some good initiatives starting to emerge from the sector, but none of the banks is really doing anywhere near enough at this point.”
Barclays is still in the spotlight for activists for being Europe’s largest financier of fossil fuels between 2016 and 2019, according to RAN.
Martin also highlights Standard Chartered as a laggard on coal. The bank announced a policy on the sector in December, but it only comes into effect this year and will initially only exclude from financing companies that rely on 100% of their revenues on coal.
“In our view, that is not ambitious enough,” says Martin. “The majority of banks have already stopped financing pure coal companies.”
At the same time, European banks are overall well ahead of their US counterparts when it comes to overall fossil-fuel financing.
RAN puts Barclays’ funding to the sector at $119 billion for 2016 to 2019. In the same period, JPMorgan accounted for $269 billion of fossil-fuel financing, while Wells Fargo, Citi and Bank of America also notched totals of more than $150 billion.
