HSBC shareholders have approved the bank's plans to phase out financing for the coal industry in developed nations by the end of the decade and by 2040 worldwide, following growing pressure for more ambitious climate action.
Preliminary results from the company's AGM Friday reveal more than 99 percent of the bank's shareholders voted in favor of the climate resolution, which was tabled by the HSBC board and commits the bank to implementing a strategy for transitioning to a net zero financial portfolio by 2050.
Under the strategy, the bank has pledged to set out a science-based approach to achieving net zero, phase out financing for coal power and thermal coal mining by 2030 in the EU and OECD, and by 2040 globally, and to report annually on its progress from this year.
The climate plan was unveiled by the bank in March in a bid to ward off a separate resolution tabled and since withdrawn by a $2.4 trillion group of shareholders led by NGO ShareAction, which had called for HSBC to set a clearer pathway to phase-out fossil fuel financing.
The commitment would require HSBC to radically transform its portfolio, with a recent report calculating the ban provided $15.2 billion in lending and underwriting to the coal industry in the two years from October 2018, including $4.1 billion to companies with coal power expansion plans. The bank is the second largest funder of fossil fuels after Barclays in Europe and undertakes extensive work with the coal sector in Asia.
The resolution which passed Friday commits the bank to publishing a policy this year that will provide further detail on the coal financing phase-out plan, its scope and targets, and to engage with ShareAction, backers of the resolution and other stakeholders as it drafts the strategy.
HSBC's group chief executive Noel Quinn told the AGM on Friday that committing to net zero "presents us with a strategic choice", as he argued against full divestment from carbon intensive firms, and in favor of engaging with its clients to promote decarbonization.
"We can choose simply to divest from clients with higher carbon emissions — but that alone is no guarantee that those emissions won't continue with financial backing from elsewhere, and it will not allow for an orderly and inclusive transition either," he said. "Or we can choose to partner with our clients to help them decarbonize by financing their transitions to climate-friendly operations and clean technologies. I passionately believe that we have a responsibility, as a leader, to drive comprehensive change if we can."
We can choose to partner with our clients to help them decarbonize by financing their transitions to climate-friendly operations and clean technologies.
Quinn also thanked ShareAction and other shareholders for "constructive discussions" over the climate strategy in recent months. "With COP26 under six months away, now more than ever, the world is looking to the financial sector to step up and play its part," he added.
ShareAction welcomed Friday's AGM vote have, but cautioned that HSBC must translate the binding commitment to "robust sector policies" that precipitate its divestment from coal, as well as other fossil fuels.
"The next six months are crucial," said Jeanne Martin, senior campaign manager at ShareAction. "We cannot afford to lose another year in the engagement process, so investors have to make their expectations very clear to HSBC as it implements its new commitments — and do so now."
ShareAction has called on HSBC to introduce financing restrictions for companies throughout the coal value chain, including those that are highly dependent on coal and building new coal mines, coal plants and coal infrastructure, while also mandating that all remaining clients publish coal phase out plans by December 2023. HSBC should also follow Barclays' lead and set absolute emission reduction targets across its oil and gas portfolio, it said.
The campaigners also have called for the coal exclusion policy to be applied to HSBC's asset management arm, as well as its banking operations, with a recent report calculating HSBC Global Asset Management holds ownership stakes in companies with plans to build 73 coal power plants across 11 countries.
Martin emphasized that HSBC shareholders should learn from their success at the bank to make similar demands at the other banks they are invested in. "Every investor which voted for the HSBC resolution has now acknowledged that banks should phase out from coal and set 1.5C targets that cover all financing. As such, they should be making similar requests to all of their bank holdings."