Banking giant says it will end financing for coal fired power and thermal coal mining by 2030 in EU and OECD countries, and by 2040 for the rest of the world – but activist investors remain unimpressed
HSBC has become the latest banking giant to tighten its coal financing policies, today pledging to phase out the financing1 of coal-fired power and thermal coal mining by 2030 in EU and OECD markets, and worldwide by 2040.
The bank said it now expects all existing thermal coal related clients to publish transition plans and confirmed it will not provide new finance where plans are not compatible with HSBC’s net zero by 2050 target. It added that it would ” decline new financing, refinancing or advisory services to any thermal coal related client that fails to show a credible transition plan within an acceptable time-frame”.
The new policy builds on current HSBC policy that prohibits finance for new coal-fired power plants and new thermal coal mines and is designed to broaden the phase out of coal financing to tackle existing thermal coal assets.
It also includes short term targets to help drive results in advance of the phase-out dates, HSBC said, adding that a science-based financed emissions target will be published in 2022 to reduce emissions from coal-fired power in line with a 1.5C pathway.
Specifically, HSBC intends to reduce its exposure to thermal coal financing by at least 25 per cent by 2025 and aims to reduce such exposure by 50 per cent by 2030, using its 2020 Task Force on Climate-Related Financial Disclosures (TCFD) reporting as its baseline.
Moreover, the bank said it would decline to provide new financing, including refinancing, and advisory services to any client that, in the view of the bank, fails to engage sufficiently on its transition plan, or where plans are not compatible with HSBC’s net zero by 2050 target. In addition, HSBC said it will seek to withdraw any financing or advisory services with any client that makes a commitment to, or proceeds with, thermal coal expansion after 1 January 2021.
Noel Quinn, group chief executive at HSBC, said the bank would work closely with existing clients in the coal industry to help them rapidly transition towards clean technologies.
“We want to be at the heart of financing the energy transition, particularly in Asia,” he said. “This is where we can have the biggest impact to help the world achieve its target of limiting global warming to 1.5C. We have a long history and strong presence in many emerging markets that are heavily reliant on coal for power generation. We are committed to using our deep relationships to partner with clients in those markets to help them transition to cleaner, safer and cheaper energy alternatives in the coming decades.”
His comments were echoed by group chief sustainability officer, Dr Celine Herweijer, who said the bank had a critical role to play in the global push to phase out coal power, especially in emerging markets.
“We need to tackle the tough issues head on to deliver on our net zero commitment, and for a global bank like HSBC with a significant presence across fast growing coal-reliant emerging economies, unabated coal phase out is right up there,” she said. “Asia’s ability to transition to clean energy in time will make or break the world’s ability to avoid dangerous climate change. Whilst our coal phase out dates and interim targets are driven by the science, we need an approach that recognises the realities on the ground in Asia today. The transition will only be successful if development needs are addressed hand-in hand with decarbonisation goals.
“Our clients in Asia are at different starting points to their EU/OECD counterparts, with more infrastructure, resource, and policy obstacles, but many have declared a strong interest and ambition to invest in the transition and diversify their businesses. The good news is that zero-marginal-cost renewables, rising carbon prices and a terminal contraction in coal demand are factors helping them diversify.”
The new policy was developed following extensive engagement with stakeholders, including activist investors who have been calling on the bank to tighten its fossil fuel financing policies.
However, Jeanne Martin, senior campaign manager at ShareAction, gave the new policy a mixed welcome, warning it contained a number of loopholes.
“The fact that HSBC has introduced a coal phase-out policy is itself a victory for shareholder engagement with banks on climate,” she said. “However, whilst an important step forward, the policy lacks the urgency and rigour required to avert the climate crisis.
“We welcome the progress HSBC has made since our engagement began, such as introducing coal-related corporate financing restrictions and extending its coal phase out commitment to its asset management arm. However, there are a number of disappointing loopholes in this policy, which allow for the continued financing of top coal companies and developers whose activities would take us past the 1.5C threshold. For example, HSBC’s definition of coal expansion allows it to continue financing companies building new coal projects, as long as these projects were announced before January 2021, while its corporate finance restrictions do not apply to existing clients outside the OECD, where it has the most exposure.”
Similarly, Adam McGibbon, UK campaign lead at Market Forces, argued the timetables proposed by HSBC for phasing out coal financing were not nearly ambitious enough.
“HSBC’s new climate policy is a long list of loopholes and a dismal, missed opportunity for real climate action,” he said. “HSBC needs to either revise its policy to explicitly rule out financing the expansion of the fossil fuel industry as of today, or cancel its commitment to the goal of net zero by 2050. The International Energy Agency has made clear you can’t have both, and HSBC continuing to champion net zero by 2050 while financing more fossil fuels is shameful greenwash.
“When it comes to dirty coal, HSBC says it hates the sin but loves the sinner, giving its clients time we don’t have to see if they change their ways, and continuing to invest in companies building new coal.”