Published on 23 March 2021

SUSTAINABLE FINANCE

Investors pressure HSBC to vote on phase-out of fossil fuels

Several investors supported a resolution calling for HSBC to elaborate on its climate policy. The bank finally decided to submit a new strategy to vote by its shareholders at its May 28th General Meeting. The strategy outlines its commitment to ending coal financing and aligning its activities with the Paris Agreement objectives.

HSBC HSBC

@HSBC

The threat of tabling an external resolution has proved successful. While some 15 investors planned to table a climate resolution, HSBC decided to take the lead. The bank announced that it would submit a new climate policy to its shareholders at its May 28th General Meeting. The policy provides that HSBC will cease all coal financing in the European Union and OECD countries from 2030 and from 2040 globally.

The policy also commits the bank to implementing and communicating a strategy that aligns all financing with the Paris Agreement objectives. This strategy will need to be supported by short and medium-term targets, starting with oil, gas, and electricity sector financing. HSBC then plans to report on progress annually, which will begin this year. The resolution must receive at least 75% of votes in favor at the general meeting to be binding.

Supported by the HSBC Board of Directors, this special resolution responds point-by-point to the resolution tabled by the NGO ShareAction and supported by major investors, including Amundi and La Banque Postale AM. These active shareholders relied on HSBC’s previous commitment to achieve carbon neutrality by 2050, asking it to specify its roadmap - including short-term targets - and explain its fossil fuel strategy.

Remain Vigilant

"[This] announcement shows that robust shareholder engagement can deliver concrete results and sets an important precedent for the banking industry. Net-zero ambitions have to be backed up with time-bound fossil fuel phase-out, and today, HSBC has taken an important step in that direction".

Shareholders withdrew their resolution to give HSBC free rein. Responsible investors expect to remain vigilant on the details of the plan no matter what happens. “Campaigners and climate-conscious investors will be watching to make sure HSBC delivers a strong policy that includes an immediate exclusion of all companies with coal expansion plans,” stated Lucie Pinson, founder of Reclaim Finance.

Specifically, this policy should take into account all the bank’s financing activities, both directly through loans and indirectly in the arrangement of operations. Last February, the Australian NGO Environmental Defenders Office (EDO) questioned HSBC and Barclays on their role in arranging the issuance of a £250 million bond by the Japan Bank for International Cooperation (JBIC), with one of the purposes being to finance a coal-fired power plant in Vietnam. According to the EDO, the two banks already committed themselves to no longer financing new coal-related projects, so this was a breach of their commitment. Therefore, the EDO saw this as a potential angle of legal attack.

JBIC has since announced that it will no longer fund coal-related projects. Still, this situation proves that climate commitments must be taken seriously by the companies that make them because those same companies may be opposed to them. Companies must therefore both be ambitious in their climate strategy - to meet the growing demand of shareholders - and rigorous in their application at all levels of their activity.

Arnaud Dumas


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