HSBC Shareholders Ask Bank to Cut Fossil-Fuel Lending Exposure

(Bloomberg) -- A group of HSBC Holdings Plc shareholders have filed a resolution urging the bank to cut its support to the fossil-fuel industry.

Amundi SA, Europe's largest listed asset manager, and Man Group Plc, the world's biggest publicly traded hedge fund firm, were among 15 institutional investors overseeing a combined $2.4 trillion that are backing the move, according to a statement from ShareAction, the U.K. nonprofit that coordinated the plan. The money managers, along with 117 individual shareholders, asked HSBC to publish a strategy to reduce its exposure to fossil-fuel assets and set targets in line with the Paris Agreement.

Banks are major contributors to global warming via their financing and lending activities, providing the world's biggest polluters with funding for extraction and drilling. Their role as the money pipeline for the fossil-fuel industry has attracted greater scrutiny from investors and activists in recent years. It also has coincided with the banks themselves starting to build up their green-finance businesses.

“For a long time, banks remained out of the spotlight and all the focus was on the actual carbon emitters, but it's becoming more obvious that banks are part of the problem too,” said Jeanne Martin, senior campaign manager at ShareAction. “There's now increased interest among investors on the role of finance firms in facilitating emissions and in decarbonization.”

In October, London-based HSBC said it would prioritize financing and investments that support the transition to a net-zero global economy and committed to cut the net-carbon emissions of its client portfolio to zero by 2050. The bank also said it planned to achieve net-zero emissions in its own operations and supply chain by 2030.

HSBC is “strongly committed to addressing climate change” and has a “clear ambition” to align its financed emissions to net zero, a company spokesperson said. The bank is a leader in sustainable finance and expects to provide as much as $1 trillion in finance by 2030 to help its customers decarbonize, the spokesperson said.

“As we work to set out the detail of our road map to net zero, we continue to positively engage with our customers, shareholders and ShareAction,” the company said in a statement.

ShareAction said investors recognize HSBC has made progress on climate-change matters, yet they've also called for the bank to do more and said its net-zero strategy contains no specific plans for phasing out its exposure to coal, oil and gas. The resolution covers HSBC's project finance, corporate lending and underwriting operations and requests the bank set short-, medium- and long-term targets.

The group of shareholders that filed the resolution, which also includes Brunel Pension Partnership, Rathbone Investment Management and Sarasin & Partners, requested HSBC make reducing its coal business the priority. The investors also asked HSBC “to consider the social dimension of the transition to a low-carbon economy” when devising its strategy and to not “rely excessively” on negative emissions technologies that remove carbon when developing targets.

“We welcome the net-zero ambition, but such an ambition needs to be underpinned with a real transition plan and reflect the sense of urgency highlighted by climate science,” said Helen Price, stewardship manager at Brunel. “Without a credible transition plan, the net-zero ambition isn't a new and improved recipe for the bank, it's just new packaging.”

Since the Paris climate agreement was signed at the end of 2015, HSBC has helped arrange $89.1 billion of bonds and loans for energy companies, excluding solar, wind and other renewable producers, the third most among European lenders, according to data compiled by Bloomberg. That includes $20.4 billion in 2020 for clients including BP Plc and Saudi Aramco.

Barclays Plc is Europe's biggest lender to corporate emitters over the period, providing $92 billion of financing, followed by BNP Paribas SA with $90.5 billion, the data show. JPMorgan Chase & Co. has been the biggest lender globally since the start of 2016.

London-based ShareAction, which advocates for responsible investment, coordinated the first climate change resolution at a European bank when a group of Barclays shareholders asked the company last year to phase out financing for polluters that don't align with the goals of the Paris accord. While only 24% of Barclays shareholders supported the resolution, which was far below the threshold required for it to be adopted, a separate net-zero proposal put forward by the bank received almost unanimous support.

HSBC shareholders will vote on the resolution at the lender's annual meeting in April.

“HSBC, being Europe's largest bank, is a critical player in emissions output and potential reductions,” said Jason Mitchell, co-head of responsible investment at Man Group. “It has established a soft ambition of being net zero by 2050, but if we can work together on its transition plan and target-setting, then it could send an important signal to other fossil-fuel financiers of the road ahead.”