HSBC Asset Management will exclude thermal coal companies from its active funds by 2040, but that policy won’t apply to its existing exchange-traded and index products.
Starting today, the $595 billion asset manager will not participate in listings or primary debt issuance of companies engaged in thermal coal expansion, it said in a statement.
By 2030, HSBC’s active funds will exclude companies with more than 2.5% of revenue from thermal coal in the European Union and OECD. It has until 2040 to exclude remaining companies globally. HSBC will also divest from firms and vote against corporate boards that do not show credible plans to transition away from thermal coal, it said.
The fund arm’s announcement builds on parent HSBC Holdings Plc’s prior commitments. The lender previously said it would reduce its exposure to thermal coal financing across its businesses by at least 25% by 2025 and 50% by 2030.
The asset management division has been dogged by an ESG controversy in recent months. Its former global head of responsible investing, Stuart Kirk, resigned in July after being suspended for criticizing climate “hyperbole” and making other controversial comments on climate change.
Coal is one of the more challenging areas for financial firms seeking to strengthen their environmental, social and governance credentials. The fossil fuel is the largest source of electricity generation and energy-related CO2 emissions, according to the International Energy Agency. Global coal demand is set to return to its all-time high in 2022, the agency said in July.
Lara Cuvelier, sustainable investment campaigner at nonprofit Reclaim Finance, said HSBC Asset Management’s new policy has “many loopholes.”
“The commitment to exit coal doesn’t apply to its passive funds and the policy fails to properly explain how they are expecting to get there,” she said.
HSBC Asset Management didn’t provide a figure for its coal investments, but referred to an estimate by Reclaim Finance, which put the number at $3.8 billion. According to HSBC, passive funds make up one sixth of its assets under management.
The asset management arm said it will not launch new ETFs or index funds with more than 2.5% exposure to thermal coal firms. It aims to engage with all listed companies with more than 10% of thermal coal revenue in its passive funds by 2025.
HSBC joins Asia-focused banks Standard Chartered and DBS in committing to phase out thermal coal financing within the next two decades. The fossil fuel, widely used across Asia, hit record prices this month amid the global energy crunch.
“Thermal coal alone doesn’t solve even a fraction of the problem” of financed emissions, said Elsa Pau, founder of Hong Kong-based BlueOnion, an ESG fintech firm. But the policy is “definitely a clear stepping up of their stewardship practice,” she added.
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