HSBC’s asset management arm has announced plans to phase-out investments in thermal coal companies from its active fund range within 20 years, the financial giant announced today.
HSBC Asset Management said its active fund range would stop investing in coal-fired power and thermal coal mining companies by 2040, beginning by excluding such firms from its portfolio by the end of the current decade across the European Union and OECD countries by 2030, achieving the same worldwide by a decade later.
The asset manager said it would actively work with company boards to support the transition away from thermal coal, and that firms which do not deliver credible plans to do so within the timeframe could see HSBC vote against company chairs at AGMs or, ultimately, lead to full divestment.
This latest development is HSBC AM’s response to the ‘Net Zero Asset Managers’ initiative of which it is a signatory. In 2020, the HSBC Group set an ambition to align its financed emissions to net zero by 2050, with today’s announcement marking a key step in the journey.
“This is a determined step to phase out thermal coal,” said Nicolas Moreau, CEO at HSBC Asset Management. “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.”
He explained HSBC had already stopped direct investments in new or existing thermal coal projects and that the coal phase out would go hand-in-hand with new investment solutions in its alternatives business, as it seeks 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 do not or will not take active credible steps to reduce emissions,” he added.
From today, moreover, HSBC Asset Management’s actively managed portfolios will not participate in IPOs or primary fixed income financing by issuers engaged in thermal coal expansion, it announced.
For all other issuers with more than 10 per cent of 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 the asset manager’s objectives, it explained.
In addition, it said there would be no new ETFs or index funds with more than 2.5 per cent exposure to thermal coal issuers with the exception being if a strategy has specific Paris-aligned 1.5°C objectives and/or clear divestment pathways.
HSBC AM said it would review its other investment strategies such as alternatives and liquidity products, and that it aims to publish interim emission reduction targets and progress against them, for assets identified as being managed in line with net zero by 2050 or sooner.
A version of this article originally appeared at Investment Week.