# Exclusive-HSBC fund arm toughens thermal coal policy to curb climate change
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-09-22
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: HSBC Accelerates Commitment to Stop Financing Thermal Coal
Meta Description: HSBC announced it will no longer fund expansion of thermal coal, aiming to reduce exposure significantly by 2030 and end coal financing by 2040. Find out more.
URL: https://financedigest.com/exclusive-hsbc-fund-arm-toughens-thermal-coal-policy-to-curb-climate-changehtml

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By Simon Jessop and Sinead Cruise

LONDON (Reuters) – HSBC Holdings Plc told Reuters on Thursday it will stop financing the expansion of thermal coal from funds it manages actively with immediate effect, marking an acceleration of a broader commitment it made last year.

Thermal coal, a cheap energy source used widely across Asian markets where many of HSBC’s clients are based, is one of the fossil fuels most responsible for climate-damaging emissions.

The [banking sector](https://www.financedigest.com/sterling-rises-as-receding-bank-sector-worries-lift-sentiment.html "Sterling rises as receding bank sector worries lift sentiment") has been slow to commit to no longer financing the production of the fuel. [Standard Chartered](https://www.financedigest.com/first-abu-dhabi-bank-reiterates-not-eyeing-offer-for-standard-chartered.html "First Abu Dhabi Bank reiterates not eyeing offer for Standard Chartered"), a competitor of HSBC in emerging markets, said earlier this year it would end all direct coal financing for clients by 2032.

HSBC said last December it would [cut exposure to thermal coal](https://www.financedigest.com/citi-pledges-to-cut-emissions-for-more-sectors-including-coal.html "Citi pledges to cut emissions for more sectors including coal") financing, across all its businesses including asset management, by at least 25% by 2025 and 50% by 2030, though non-EU or non-OECD-based clients could be funded until a global phase-out by 2040.

In a new 10-point plan, HSBC [Asset Management](https://www.financedigest.com/britains-post-brexit-asset-management-revamp-eyes-liquidity-tokenisation.html "Britain’s post-Brexit asset management revamp eyes liquidity, tokenisation"), which oversees around $600 billion in assets, said it would immediately stop investing in listings or primary debt issuance of any company engaged in thermal coal expansion.

HSBC estimates that there are more than 300 companies globally with more than [10% of revenues](https://www.financedigest.com/soccer-european-revenues-rise-10-in-2020-21-despite-covid.html "Soccer-European revenues rise 10% in 2020-21 despite COVID") tied to the fuel. The Global Coal Exit List, which tracks finance firms’ ties to the coal sector, said HSBC’s [fund arm exposure was $3.4 billion](https://www.financedigest.com/uk-investors-add-1-2-billion-to-equity-funds-in-march-calastone.html "UK investors add .2 billion to equity funds in March – Calastone") at end-November.

[HSBC asset management’s head of sustainability Erin Leonard said in an interview that the number of companies in the bank’s](https://www.financedigest.com/hsbc-acquires-british-arm-of-stricken-silicon-valley-bank.html "HSBC acquires British arm of stricken Silicon Valley Bank") investment portfolio that have so far confirmed plans to expand their exposure to thermal coal was “relatively small.

HSBC said it will have engaged with all listed companies in its [actively managed](https://www.financedigest.com/with-the-right-active-manager-you-really-do-get-what-you-pay-for.html "With the Right Active Manager, You Really Do Get What You Pay For") portfolios with more than 10% of revenues from thermal coal by next year.

By the end of 2030, the group’s active portfolios would hold no listed securities of companies reliant on coal for more than 2.5% of revenues in the [European Union or OECD markets; and that would be expanded to all markets](https://www.financedigest.com/explainer-why-european-money-market-funds-inflows-are-lagging-behind-the-u-s-torrent.html "Explainer-Why European money market funds inflows are lagging behind the U.S. torrent?") by 2040.

HSBC aims to have begun engaging with all the companies it [holds shares](https://www.financedigest.com/energy-utilities-sector-to-hold-60-share-in-switchgear-monitoring-system-market-by-2031.html "Energy & Utilities Sector To Hold 60% Share In Switchgear Monitoring System Market By 2031") in above the 10% threshold, including those held in its passive funds, by 2025, Leonard said.

For [companies in its active](https://www.financedigest.com/what-happens-if-a-company-doesnt-have-any-records-of-its-rd-activities.html "What happens if a company doesn’t have any records of its R&D activities?") funds with more than a 10% revenue exposure to thermal coal, all initial public offerings and primary debt issuance would be subject to “enhanced due diligence” of the company’s plan to transition to net-zero, according to HSBC.

HSBC said in its 2021 annual report that the [bank’s thermal coal loan exposure was $1 billion](https://www.financedigest.com/first-abu-dhabi-bank-could-renew-35-billion-offer-for-stanchart-bloomberg-news.html "First Abu Dhabi Bank could renew  billion offer for StanChart -Bloomberg News"), or 0.2% of its total wholesale loan book.

When it comes to holding the boards of companies with significant thermal coal exposure to account, HSBC said its [fund arm would vote](https://www.financedigest.com/norway-wealth-fund-to-vote-for-labour-rights-motion-at-starbucks-agm.html "Norway wealth fund to vote for labour rights motion at Starbucks AGM") against the election of board chairs at companies planning to expand production and use of thermal coal.

Chairs at companies with more than 10% revenue exposure, and which do not provide acceptable reporting on [climate risk](https://www.financedigest.com/institutional-investors-back-shell-board-lawsuit-over-climate-risk.html "Institutional investors back Shell board lawsuit over climate risk"), or where transition plans remain weak after a period of engagement, would also face being opposed when they seek re-election.

This is a much more public [signal to the companies we invest](https://www.financedigest.com/why-2022-signals-the-green-revolution-in-investing.html "Why 2022 signals the green revolution in investing") in on our intentions and how we’re going to be voting,” Leonard said.

A spokesperson for ShareAction, a non-profit advocating for sustainable business, welcomed HSBC’s announcement and [called on it to set interim milestones on its engagement](https://www.financedigest.com/redpalm-enhances-client-engagement-with-vias-advanced-call-routing-solution.html "REDPALM ENHANCES CLIENT ENGAGEMENT WITH VIA’S ADVANCED CALL ROUTING SOLUTION ") with companies.

HSBC also said it would stop launching index funds with more than a “de minimis” exposure to thermal coal, which the [group defined as more than 2.5% of a company’s revenues](https://www.financedigest.com/iris-software-group-names-matt-tuson-as-chief-revenue-officer.html "IRIS Software Group names Matt Tuson as Chief Revenue Officer").

For all existing passive funds, which make up a sixth of HSBC’s total assets, it would [work with clients to transition to greener alternatives and with index providers to create](https://www.financedigest.com/deployed-raises-4m-to-redefine-how-statements-of-work-are-created-and-projects-are-planned.html "Deployed raises M to redefine how Statements Of Work are created and projects are planned") more indexes without exposure to thermal coal.

[(Reporting by Simon Jessop and Sinead Cruise in London; Editing by Greg Roumeliotis and Lisa Shumaker)](https://www.financedigest.com/london-reclaims-place-as-preeminent-global-financial-centre-for-the-first-time-since-2013-according-to-global-regulatory-outlook-report-from-duff-phelps.html "London reclaims place as preeminent global financial centre for the first time since 2013, according to Global Regulatory Outlook report from Duff & Phelps")


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