- Policy allows HSBC Global Asset Management’s huge investment in companies building 99 gigawatts of new coal plants to continue,
- Financing able to continue for problem coal companies like Adaro (Indonesia) and Adani (India)
HSBC’s long-awaited new coal policy, a month after the close of the COP26 climate summit in Glasgow, ignores the elephant in the room: HSBC’s ownership stakes in companies attempting to build 99 Gigawatts of new coal power, according to environmental finance organisation Market Forces.
The International Energy Agency (IEA)’s ‘Net Zero by 2050’ roadmap, lays out a pathway for a fifty-fifty chance of meeting the net zero by 2050 goal that HSBC claims to support. HSBC’s policy utterly fails to meet this benchmark.
The new policy’s major failures include:
- HSBC’s USD $621 billion asset management business is not within scope. A Market Forces investigation earlier this year demonstrated HSBC Global Asset Management is invested in coal companies that together plan 99 gigawatts (GW) of new coal plants, emitting 15 billion tonnes of CO2 over their lifetimes (the equivalent of 32 years of the UK’s annual emissions) and causing 19,000 additional air pollution deaths per year.
HSBC’s policy applies to HSBC Group Holdings and its subsidiaries, which do not include its asset management business. HSBC also refers readers of the policy to a separate link to a year-old HSBC Global Asset Management Climate Change policy. The glossary defines ‘financing and advisory services’, but this does not extend to buying equity stakes or bonds.
- Companies given up to two years to produce decarbonisation strategies, but no clear consequences for failure. HSBC is exposed to numerous coal companies with no plans to phase out coal production in line with net-zero by 2050, but is allowing these companies up to two more years to produce plans. This includes the likes of Adaro, financed by HSBC in April 2021, a massive Indonesian coal miner, which is showing evidence of expansion. Adaro’s 2020 annual report shows the company recently reclassified US$243 million in assets from “mines under development” to “mines in production” indicating Adaro is moving more mines into operation. There is no indication from the policy that Adaro would no longer receive financial support from HSBC after 2023.
- Allowing business as usual to continue for many of HSBC’s non-OECD coal clients. Although revenue thresholds will be in place to reduce exposure to coal companies operating in the OECD, HSBC has chosen to exclude non-OECD coal companies from this, giving themselves a free pass to keep funding coal mega-polluters such as Indonesian coal giant Adaro. Adaro has 1.1 billion tonnes of coal reserves, which if combusted would be equivalent to the annual emissions of India. Analysis from Standard Chartered rated Adaro’s business plan as aligning with a catastrophic ‘hothouse Earth’ scenario of 5-6°C of global warming. The policy will also allow the bank to continue investing in shares and bonds of major coal companies such as the Adani Group. Adani is massively expanding its fossil fuel operations, including by pursuing the Carmichael coal mine in Australia, opening up one of the world’s biggest untapped coal reserves in the Galilee Basin. Nothing in the policy bars HSBC from financing these coal companies again. Companies with high coal content will only face “enhanced due diligence” which to date has led to repeated lending and underwriting.
- HSBC’s coal policy will not apply to a long list of ‘thermal coal services,’ such as engineering, procurement, construction, coal trading, coal processing, coal transport and logistics and more. This exempts many companies dependent on the thermal coal industry continuing and even expanding. For example, Adaro and Adani have significant revenues from coal mining services, often from servicing their own mines, yet these revenues will have no bearing on HSBC’s willingness to continue financing these mega coal mining companies.
- The bank’s policy exempts metallurgical coal mines, despite the IEA Net-Zero by 2050 roadmap confirming no new metallurgical coal mines are needed and a sharp decline in metallurgical coal use is also required in the coming decades. HSBC allows coal mines containing 30% or less thermal coal to be treated as metallurgical coal mines, despite the fact that most metallurgical coal mines contain a mixture of thermal and metallurgical coal.
In addition, if HSBC is serious about its ‘Net Zero by 2050’ target, it should also end its financing of new oil and gas production – in line with the IEA’s “Net Zero by 2050’ report. While this policy was the result of a direct intervention by shareholders to further its coal policy measures, there can be no excuse for a bank committed to the goal of net zero by 2050 to be financing projects and companies expanding oil and gas. In the weeks since COP26, HSBC has participated as part of a syndicate of banks raising a USD $1 billion bond for Mexican state-owned oil company Pemex. The company is currently expanding its oil refining capacity. It also helped provide a $3 billion loan to the Abu Dhabi National Oil Company (ADNOC). The company has plans to expand its drilling operations. HSBC also acted as a financial advisor to energy and commodity trader Vitol Group in its $2.3 billion acquisition of 47.5% of Vivo Energy, a UK-based downstream petroleum company.
Adam McGibbon, UK Campaign Lead at Market Forces, said: “HSBC’s new climate policy is a long list of loopholes and a dismal, missed opportunity for real climate action.
HSBC needs to either revise its policy to explicitly rule out financing the expansion of the fossil fuel industry as of today, or cancel its commitment to the goal of net-zero by 2050. The International Energy Agency has made clear you can’t have both, and HSBC continuing to champion net-zero by 2050 while financing more fossil fuels is shameful greenwash.
When it comes to dirty coal, HSBC says it hates the sin but loves the sinner, giving its clients time we don’t have to see if they change their ways, and continuing to invest in companies building new coal.”
Yuyun Indradi, Trend Asia Indonesia Executive Director, said: “Since 2009, HSBC has provided over US$300 million to Adaro Energy, including its subsidiaries in other coal-related businesses, such as coal mining contracting and coal transport. In April 2021, it helped provide another US$400 million for Adaro Energy’s coal mining as part of a syndicate of banks. HSBC’s new policy specifically excluded “other coal-related activities.” If the bank can still fund Adaro Energy and its subsidiaries, the policy can’t be worth very much.
Notes for editors:
- Market Forces campaigns for financial institutions that have custody of our money to protect not damage our environment. www.marketforces.org.uk
- The influential Banking on Climate Change report, the most comprehensive overview of bank financing of fossil fuels, shows that since the signing of the Paris Agreement in 2015, HSBC has financed US $110.7 billion to the coal, oil and gas sectors.
- The UN Human Rights Council recently confirmed that banks have human rights responsibilities when it comes to the impacts of companies in which they hold shares on behalf of clients (such as in the case of HSBC Asset Management coal investments).