Investors Demand Credible Climate Strategy

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Stockholm (NordSIP) – In a sign of the increased climate scrutiny applied to financial markets, fifteen institutional investors filed a climate change resolution calling on HSBC to publish a strategy and targets to reduce its exposure to fossil fuel assets.

The fifteen institutional investors have a combined wealth of US$2.4 trillion in assets under management and include Schroders, Hermes EOS and AkademikerPension. The proposed resolution was also supported by 117 individual shareholders and co-ordinated by ShareAction, a responsible investment NGO.

The Resolution

- Promotion -

Beyond the strategy and targets, the resolution also encourages HSBC to focus on a “Just Transition” so as to integrate the social effect of the transition to a low-carbon economy into its strategy. Citing criticism by the IPCC special report on 1.5°C that large-scale CO2 removal is “unproven” and that “reliance on such technology is a major risk in the ability to limit warming to 1.5°C”, the proposal also warns that HSBC’s strategy should not rely on climate scenarios dominated by such technologies.

“HSBC’s strong presence in Asia will be critical in encouraging a much-needed transition away from coal dependency in that region, while at the same time increasing HSBC’s own resilience to climate risk,” Jens Munch Holst, CEO of AkademikerPension, said. “We urge HSBC to listen to its shareholders by introducing robust fossil fuel project and corporate finance restriction criteria and publishing a 1.5°C-aligned engagement policy for its clients in high-carbon sectors.”

To pass, the resolution needs to receive more than 75% of the votes at HSBC’s AGM in April 2021. In such a situation, the bank will have to start publishing a strategy and short-, medium- and long-term targets to reduce its exposure to fossil fuel assets on a timeline consistent with the goals of the Paris agreement.

HSBC’s Dubious Credentials

In October 2020, HSBC announced its ambition to be a net-zero bank by 2050 at the latest, but the target announcement did not include any commitment to reduce HSBC’s funding for fossil fuels, in particular coal, which has risen each year since 2016. However, research into HSBC’s activities have raised questions about the credibility of this commitment.

According to the Rainforest Action Network (RAN), HSBC has financed some of the world’s largest fossil fuel companies to the tune of US$87 billion since the signing of the Paris Agreement (2016-2019), making it Europe’s second-largest financier of fossil fuels, after Barclays. Research from Shareaction also shows the bank pumped an additional US$1.8bn into fossil fuel companies in the four months leading up to the announcement.

Together with JP Morgan, Morgan Stanley, Citigroup, Goldman Sachs and NCB Capital Company, HSBC was also a dealer in the infamous Saudi Aramco US412 billion bond issued at the start of April 2019, a lending operation that took place in the aftermath of the gruesome political assassination of Jamal Khashoggi.

“The message from the resolution is clear: net zero ambitions by top fossil fuel financiers are simply not credible if they fail to be backed up by fossil fuel phase-out plans,” Jeanne Martin, Senior Campaign Manager at ShareAction, explained. “Five years after the Paris agreement was signed, HSBC continues to pour billions into the coal sector, a behaviour that is at odds with limiting global warming to 1.5°C. If HSBC is serious about its net zero ambition, it will support this resolution.”

“Phase out from coal is paramount to achieve this goal, and we believe that the adoption of climate strategies by companies is a critical factor of investment of which shareholders should be fully informed. Amundi thus fully backs this resolution, as part of our more global commitment to banks on their energy transition policy in general and their coal policy in particular,” Martin added.

Image by malcolm swallow from Pixabay

Partner message

The coronavirus epidemic has further accelerated the rise of ESG into the investment mainstream. As deficits skyrocket, bond investors have an opportunity to engage with governments on climate change, argues Thomas Dillon, Senior Macro ESG Analyst at Aviva Investors.

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