HSBC Asset Management to Stop Investing in Thermal Coal
HSBC Holdings plc
HSBC Asset Management (HSBC AM) has established a policy to phase out coal-fired power and thermal coal mining from its listed holdings.
HSBC Asset Management will actively collaborate with company boards to accelerate the transition away from thermal coal in the EU and OECD markets by 2030 and worldwide by 2040. Companies that do not demonstrate credible plans to transition away from thermal coal within the timeframe may lose HSBC AM support, including voting against company chairs at AGMs and, eventually, divesting.
The policy aligns with the Net Zero Asset Managers initiative, to which HSBC AM is a signatory. The HSBC Group announced a goal in 2020 to reduce its financed emissions to net zero by 2050. The announcement is a significant step toward the bank's net zero ambition, contributing further to the Group-wide announcement to phase out coal-fired power and thermal coal mining.
Nicolas Moreau, CEO, HSBC Asset Management said:
“This is a determined step to phase out thermal coal. Global emissions will only be reduced if there is concerted collaboration to meet the goals of the Paris Agreement and we are committed to playing our part. We have already stopped direct investments in new or existing thermal coal projects. We are working on two fronts: coal phase-out will go hand-in-hand with pioneering new investment solutions in our Alternatives business to scale sustainable infrastructure investment and venture capital for critical climate technology solutions.
“We believe in working in partnership with our clients to transition away from thermal coal while supporting a just transition. But we are clear that we will need to walk away from companies who don’t or won’t take active credible steps to reduce emissions.”
The highlights of the policy include:
Engagement with active and passive holdings– If the engagement has not been successful HSBC AM will not vote for the re-election of chairs of listed issuers with more than 10 per cent revenue exposure to thermal coal which do not provide Task Force on Climate-related Financial Disclosures (TCFD) or equivalent reporting. It will also vote against chairs whose company’s transition plans remain inadequate following engagement.
Strengthened engagement with these issuers; with the option of divesting over time from companies whose transition plans are considered incompatible with HSBC AM’s net zero objectives.
Active portfolios - By the end of 2030, HSBC AM will not hold listed securities of issuers with more than 2.5% revenue exposure to thermal coal in EU / OECD markets and globally by 2040 across its actively managed portfolios. Applicable to all portfolios where HSBC AM has investment discretion and funds where HSBC AM has significant control.
From today, actively managed portfolios will not participate in IPOs or primary fixed income financing by issuers engaged in thermal coal expansion.
For all other issuers with more than 10 per cent revenue exposure to thermal coal, participation in IPOs or primary fixed income financing will be subject to enhanced due diligence of transition plans to ensure alignment with HSBC AM’s Net Zero objective.
Passive - There will be no new Exchange Traded Funds (ETFs) or index funds with more than 2.5% exposure to thermal coal issuers. The only exception would be if an ETF or index fund’s strategy has specific Paris-aligned 1.5°C objectives and/or clear divestment pathways. HSBC AM will work with index providers to extend the range of indices and passive products that do not have exposure to thermal coal, with the expectation that thermal coal exposure will decrease.
HSBC AM will also assess other investing strategies (for example, alternatives and liquidity) and will disclose interim emission reduction targets and progress toward them for assets identified as being managed to achieve net zero emissions by 2050 or sooner.
The policy will be revised on an annual basis to take into account changes in relevant external factors.
HSBC AM is committed to delivering investment strategies that enable a safe and affordable energy transformation while also phasing out thermal coal. An urgent increase in investment in clean energy infrastructure is necessary, and HSBC AM is focusing on initiatives to expedite clean energy solutions, as well as early-stage technologies to support a robust low-carbon energy system through its Alternatives business.
Climate technology venture capital and investment in sustainable infrastructure initiatives are examples of this. Climate Asset Management, a joint venture with Pollination, enables investment in nature-based solutions to cut emissions while also protecting and restoring biodiversity.