Engagement Progress at HSBC

Today’s announcement by HSBC shows the power of shareholder engagement.

It is an exceptional moment for Brunel and the coalition of investors that has engaged with the bank with two chief aims. We wanted to persuade it, first, to publish a climate strategy and, second , to set short-, medium- and long-term targets to reduce its fossil fuel exposure in line with the Paris Agreement.

The coalition of investors, representing $2.4 trillion in assets, agreed to withdraw a shareholder resolution filed in December, in exchange for the board-backed resolution announced today. As a result of intensive and diligent engagement over recent months, Europe’s largest bank has therefore tabled a resolution that commits it to:

• Set, disclose and implement a strategy with short- and medium-term targets to align its provision of finance (covering lending, project finance, corporate finance and underwriting) across all sectors, starting with Oil & Gas and Power & Utilities, with the goals and timelines of the Paris Agreement, as per Articles 2.1a and 4 of the Paris agreement
• Publish 2025 and 2030 targets for its ‘Oil and Gas’ and ‘Power & Utilities’ portfolios by the end of 2021 and use 1.5C pathways that are not overly reliant on Negative Emissions Technologies to do so
• Publish a policy to phase out the financing of coal-fired power and thermal coal mining by 2030 in markets in OECD countries, and by 2040 elsewhere. HSBC will publish the policy this year
• Report on progress against that strategy and on policy on an annual basis, starting with the 2021 Annual Report and Accounts, including a summary of the methodology, scenarios and core assumptions used

We welcome the special resolution, which will be put to a vote at HSBC’s AGM on 28 May. We encourage shareholders to support it so that the votes reach 75%, the threshold needed to make it binding. Whilst we have withdrawn the shareholder resolution this year, we may take further action next year if we are unsatisfied with the bank’s progress. Ongoing engagement is key.

Implementation

The investor group wrote to HSBC earlier this week, welcoming HSBC’s commitments. The focus now must be on putting these plans into practice. Given the carbon intensity of the sector, HSBC’s coal phase-out plan is especially urgent, and the bank can help accelerate a shift away from coal-based activities, particularly in Asia.  We asked HSBC to publish clear, timebound plans which include:

• A prohibition of general corporate financing and underwriting to companies that are highly dependent on coal mining and/or coal power¹, as well as companies planning new coal mines, coal plants and coal infrastructure
• A commitment to help clients develop, publish and implement coal phase-out plans in line with the 2030/2040 timelines by a specific date and no later than December 2023
• A commitment to focus on the entire coal supply chain, including coal equipment manufacturers and any other coal supply chain function that contributes to the expansion of coal-related activities

The supporting statement, to be published on 24 March, states that HSBC would “publish by the end of 2021 a policy that will… provide further detail on the phase out plan, its scope and interim targets”. It also confirms that the bank will “engage with ShareAction, representatives of the group of co-filing institutions and other stakeholders in the development of this policy.”

Engagement is how we have got this far, and it is how we plan, as a coalition of investors, to get a lot further. We look forward to working with the Board and executive team as they move forward with delivering on their commitments.

1 Highly coal-dependent companies are defined as those where over 30% of their revenues or energy mix comes from coal; AND/OR annual production, trading, or consumption of coal exceeds 20 million tonnes annually; AND/OR installed coal power capacity is greater than 10,000 MW; AND/OR the company is planning investments into new coal-related infrastructure.

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