Shareholders force HSBC to phase-out coal

Following negotiations with a $2.4tn coalition of investors led by ShareAction, HSBC will phase out financing of coal-fired power and thermal coal mining by 2030 in the EU and OECD and by 2040 elsewhere.

The coalition, which includes Amundi and Man Group, has agreed to withdraw a shareholder proposal in exchange for the board-backed resolution, but said it may take further action next year if it is unsatisfied with the bank’s implementation of the new commitments.

To date, HSBC has been one of the only remaining European banks with no corporate financing restriction for companies exposed to the thermal coal sector and provided more than $15bn of financing to coal developers from October 2018 to October 2020.

Jeanne Martin, senior campaign manager at ShareAction, said: “Today’s 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-outs and today HSBC has taken an important step in that direction.”

The HSBC board-backed proposal is a ‘special resolution’, which would become binding on the bank if approved by 75 per cent of shareholders at the AGM. If passed, it would commit the bank to: Set, disclose and implement a strategy with short- and medium-term targets to align its provision of finance across all sectors to the Paris Agreement. Publish and implement a policy to phase out the financing of coal-fired power and thermal coal mining in all markets by 2040 and report on progress against that strategy and policy on an annual basis.

There will also be a commitment to “use science-based scenarios that follow 1.5C warming pathways, and which are not overly reliant on negative emissions technologies, to assess alignment of [its] financing activities. We plan to provide further detail on this approach by the end of 2021, starting with the Oil & Gas and Power & Utilities sectors, and including methodology, scenarios, treatment of negative emissions and core assumptions used.”

ShareAction said this makes HSBC the first mainstream bank to take such a stance on negative emissions technologies and noted that the IPCC has said that CO2 removal “deployed at scale is unproven and reliance on such technology is a major risk in the ability to limit warming to 1.5C.”

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