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HSBC tells clients to exit coal by 2030

Published on: 28 December 2021 04:16 AM
HSBC will not provide new finance where plans are not compatible with HSBC’s net zero by 2050 target
HSBC will not provide new finance where plans are not compatible with HSBC’s net zero by 2050 target

A Brief Summary

Global banking and financial services company HSBC announced its policy that tells clients to phase-out coal from their operations by 2030 in EU and OECD markets and by 2040 worldwide.

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HSBC Holdings plc ("HSBC") announced a detailed policy to phase out coal-fired power and thermal coal mining financing in EU and OECD markets by 2030, and globally by 2040. HSBC will phase out finance to customers whose transition plans are not compatible with HSBC's net-zero by 2050 goal, given the fast reduction in coal emissions required for any viable path to 1.5°C2. It expands on HSBC's present policy, which prohibits new coal-fired power stations and thermal coal mines from receiving financing, while also widening the approach to accelerate the phase-out of existing thermal coal.

The bank's thermal coal phase-out policy, which will be reviewed annually based on evolving science and internationally recognised guidance, is a key part of achieving its October 2020 goal of aligning its financed emissions – its portfolio of clients' greenhouse gas emissions – to net-zero by 2050 or sooner.

Short-term targets are included in the policy to assist generate measurable achievements ahead of the phase-out deadlines. In 2022, a science-based funded emissions target to cut emissions from coal-fired power in accordance with a 1.5°C route will be released. HSBC also plans to minimise its thermal coal finance exposure by at least 25% by 2025, and by 50% by 2030, using its 2020 Task Force on Climate-Related Financial Disclosures (TCFD) reporting as a baseline. After 2030, thermal coal finance will only be available to customers with thermal coal assets in non-EU/OECD markets, and it will be phased out entirely by 2040. In its Annual Report and Accounts, HSBC will report on progress in lowering thermal coal financing every year.

HSBC will engage with impacted clients to develop and publish transition plans by the end of 2023 that are compliant with the bank's net zero by 2050 goal. Client transition plans will be evaluated on an annual basis based on several factors, including the level of ambition to reduce greenhouse gas emissions, the clarity and credibility of the transition strategy, including any proposed abatement technologies, the adequacy of disclosure, and consideration of the 'just transition' principles.

If no transition plans are created, HSBC will have to decide whether or not to continue providing financing to that client, since there will be no basis for determining whether or not the customer complies with HSBC's promise to phase down coal funding. Any customer who, in the bank's opinion, fails to engage enough on its transition plan, or whose plans are not compatible with HSBC's net zero by 2050 aim, will be denied additional funding (including refinancing) and advisory services. Furthermore, any customer who commits to, or advances with, thermal coal growth after January 1, 2021 will see HSBC remove any finance or consulting services.

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