Wow. HSBC, one of the biggest funders of fossil fuels in the world, has announced plans to set clear deadlines for ending coal financing.
The bank’s board of directors has tabled a resolution for its upcoming AGM to phase out support for coal companies. If it passes, it will commit HSBC to developing a new policy on coal financing by the end of the year and a strong plan to exit coal in the next 20 years.
This is a huge victory. It’s the result of years of work by campaigners, grassroots groups, investors and customers – especially those in Asia – who have pushed HSBC to end fossil financing. In January, a group of HSBC investors – aided by ShareAction – filed an earlier resolution which pushed the bank into making this move.
This announcement also shows that, without a doubt, sustained pressure is shifting banks and other finance groups away from high-carbon, highly damaging companies.
It has to be said that HSBC hasn’t gone as far as it could, and there are still questions about how the commitments will be implemented. But the significance of this – and the shift in the bank’s position – shouldn’t be underestimated.
In October 2020, HSBC released its hollow net-zero carbon plan which failed to explain how the bank would extract itself from the fossil fuel industry. And in January, chair Mark Tucker was saying that getting out of coal was “not the best option for the environment or for the people and the communities that rely on these traditional industries”. Now, less than two months later, his bank has laid out plans to phase out financing for coal and other fossil fuels.
So if all goes to plan, what will HSBC commit to? HSBC has said it will end coal financing across the world by 2040 (and in OECD countries by 2030), and has set near-term targets that may lead to reducing oil and gas financing. It has also acknowledged that expanding the coal industry doesn’t mesh with the Paris climate agreement.
In addition, HSBC will reject any yet-to-be-invented carbon reduction technology as a solution. This is particularly significant, because it means HSBC’s commitments are based on what’s possible right now, rather than relying on unproven developments like carbon capture and storage to provide magic solutions.
The implications of this announcement also spreads far beyond HSBC. That a bank of its scale has made this move sets the bar for other financial institutions to reach in their commitments. In the UK, all eyes are now on Barclays and Standard Chartered to produce even more ambitious plans.
However, all of this doesn’t let HSBC off the hook. It still needs to put this plan into operation with a strong policy by the end of the year, and there are still big questions. Will HSBC immediately cease providing new finance to coal companies that are actually expanding their coal businesses, or will it still create new agreements ahead of the deadlines? Will HSBC exclude companies at any point on the coal supply chain, not just power plants or mining?
So the pressure from campaigners and conscientious investors will remain to ensure HSBC delivers. But this is a moment worth celebrating as a major step forward in ending finance for fossil fuels.