HSBC’s exclusive fund branch toughens thermal coal policy to limit climate change According to Reuters


© Reuters. FILE PHOTO: The HSBC logo is seen on a branch bank in the financial district in New York, U.S., August 7, 2019. REUTERS / Brendan McDermid / File Photo


By Simon Jessop and Sinead Cruise

LONDON (Reuters) – HSBC Holdings Plc (LON:) told Reuters on Thursday it would stop funding coal-fired expansion from funds it actively manages with immediate effect, marking an acceleration of a broader commitment. which they did last year.

Thermal coal, a cheap energy source widely used across Asian markets where many of HSBC’s clients are based, is one of the fossil fuels most responsible for emissions. harmful to the climate.

The banking sector has been slow to commit to no longer funding fuel production. Standard Chartered (OTC:), an HSBC competitor in emerging markets, said earlier this year it would end all direct coal financing to customers by 2032.

HSBC said last December it would cut its exposure to thermal coal funding, across all of its businesses including asset management, by at least 25% by 2025 and 50% by 2020. 2030, although non-EU or non-OECD clients may be funded until global phase-out in 2040.

In a new 10-point plan, HSBC Asset Management, which oversees some $600 billion in assets, said it would immediately stop investing in the listings or issuing primary debt of any firms involved in the scheme. coal-fired power expansion.

HSBC estimates that there are more than 300 companies globally with more than 10% of revenue tied to fuel. The Global Coal Exit List, which tracks financial firms’ relationship with the coal sector, said HSBC’s fund portfolio was $3.4 billion at the end of November.

In an interview, HSBC’s head of wealth management Erin Leonard said the number of companies in the bank’s portfolio that have confirmed plans to expand exposure to thermal coal is “relatively small”. “.

HSBC said it will join all listed companies in its actively managed portfolio with more than 10% of its thermal coal revenue next year.

By the end of 2030, the group’s active portfolio will be free of the listed securities of coal-dependent companies that account for more than 2.5% of sales in the European Union or OECD markets; and that will be expanded to all markets by 2040.

HSBC aims to start engaging with all companies in which it holds shares above the 10% threshold, including those held in its passive funds, by 2025, Leonard said.

For companies in its operating fund with a thermal coal turnover ratio higher than 10%, all initial public offerings and primary debt issues will be subject to “judgement.” advanced decision” about the company’s plan to transition to net worth, according to HSBC.

HSBC said in the bank’s 2021 annual report that the bank’s coal-fired power loan amounted to $1 billion, or 0.2% of the bank’s total wholesale loans.

When it comes to board account holdings of companies with significant thermal coal exposure, HSBC said its fund arm will vote against the board seat election at companies plan to expand production and use of thermal coal.

Seats at companies that have a turnover ratio of more than 10% and do not provide acceptable reporting on climate risks or where transition plans remain weak after a period of participation, will also have to faced opposition when they ran for re-election.

“This is a more public signal to companies that we invest in our intentions and how we will vote,” Leonard said.

A spokesperson for ShareAction, a nonprofit that advocates for sustainable business practices, welcomed HSBC’s announcement and urged them to set temporary milestones for their engagement with the companies.

HSBC also said it would stop rolling out index funds with more than “minimum” exposure to thermal coal, which it defines as more than 2.5% of a company’s revenue.

Of all existing passive funds, which account for one-sixth of HSBC’s total assets, it will work with clients to transition to greener alternatives and with index providers to generate more stats without exposure to thermal coal.

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