LONDON/HONG KONG -- HSBC shareholders overwhelmingly voted to phase out coal financing by 2040 and align the bank's lending with Paris Agreement climate goals
The resolution, supported by over 99% of votes at an annual shareholders meeting Friday, was spearheaded by a coalition of investors managing $2.4 trillion in assets led by U.K.-based nonprofit ShareAction. A 75% majority was needed to make the resolution binding.
HSBC ranked among the 10 biggest financers of fossil fuels in the world last year, with roughly $23.54 billion in funding for the sector, according to the Rainforest Action Network, a charity. The bank has provided $110 billion in total to the fossil fuel sector since the 2016 Paris accord, the data showed.
ShareAction and the investors, which included Amundi, Man Group and 13 others, withdrew their much stronger resolution and agreed to back HSBC's plan after months of negotiations. The group has pledged to take further action next year if they conclude HSBC has not delivered on its promises.
"As far as I'm concerned, we will always be judged on what we do next," Noel Quinn, chief executive of HSBC, told shareholders at the meeting.
"I expect to be held accountable by our stakeholders and I welcome that dialogue," he added.
The bank's board had recommended shareholders vote in favor of the resolution.
The commitments go further than HSBC's aims set in October to reduce carbon emission to net zero by 2050, which was criticized by campaigners as not addressing HSBC's lending to fossil fuel companies.
HSBC will now phase out the financing of companies involved in coal-fired power and thermal coal mining in the European Union and OECD countries by 2030, and by 2040 elsewhere. The phasing out relates to providing project finance, direct lending, and underwriting capital markets transactions for corporate clients of Global Banking and Commercial Banking.
The bank will also set short- and medium-term targets to align its lending and underwriting with the goals and timelines of the Paris Agreement, which aims to limit global warming. Starting with oil, gas, power and utilities this year, the approach will widen to include other sectors next year. The resolution also establishes annual reporting of progress on the net-zero emissions strategy, with the first report to be published in February.
Quinn said that simply divesting from clients could lead to continued emissions if they find funding elsewhere.
Instead, "we can choose to partner with our clients and help them to decarbonize by financing their transition to climate-friendly operations and clean technologies," he said.
Thanking ShareAction and the group of shareholders, he said he looked "forward to demonstrating how we are delivering all the commitments we've made."
In the five years since the Paris Agreement, the world's 60 biggest banks have financed fossil fuels to the tune of $3.8 trillion, the data from the charity shows. While global banks in recent years have made commitments to reduce support to fossil fuels, analysts have pointed out the plans have been vague and banks have continued to increase funding.
However, the resolution by the bank and the backing by some of the world's biggest money managers shows investors and financial companies are starting to bow to public pressure to join the fight against climate change and global warming.
Regulators are also starting to play their part. The European Central Bank in March, while revealing the preliminary results of its economic stress test to gauge the impact of climate change, pointed out global warming was turning out to be a major source of systemic risk as it raised the chances of mass corporate loan defaults. The ECB has previously said it was prepared to raise the amount of capital required at banks considered to have particularly high levels of climate risks in their balance sheets as early as this year.