HSBC's Green Credentials Come Under Fresh Scrutiny

By Fabiana Negrin Ochoa

HSBC's green credentials are under fresh scrutiny, with activist shareholders pressing the Asia-focused bank to clarify plans to spend up to $1 trillion on sustainable finance in the coming years.

The investor group, which has $892 billion in assets under management, said Friday that it intends to ask the bank at its annual general meeting to explain how it will spend its green funds. It also wants the bank to set a funding target for renewable energy.

ShareAction, a nonprofit focused on responsible investing that is coordinating the group, described HSBC's target of spending between $750 billion and $1 trillion on sustainable finance by 2030 as too broad and vague.

"It gives the impression the bank is scaling up its efforts on green finance without demonstrating the difference it will make, or whether it is financing the green activities that are most needed," Jeanne Martin, head of the banking program at ShareAction, said in a statement.

The shareholder coalition also includes U.K. nonprofits Epworth Investment Management and the Ethos Foundation, as well as investment company Royal London Asset Management, Paris-based hedge-fund manager Axiom Alternative Investments and asset manager La Francaise Asset Management, among others.

HSBC said it will answer all of the group's questions at its AGM.

"We thank ShareAction for its engagement over a number of years on a range of topics relating to our climate strategy, and for recognizing the good progress that we have made," it said in an emailed statement.

HSBC said that since it set its sustainable finance target in 2020, it has reported on its progress yearly, giving a "detailed breakdown across green, sustainable (which combine green and social) and social products."

This isn't the first time investors have challenged HSBC on its sustainability efforts.

In 2021, a group of 15 institutional investors--coordinated by ShareAction--filed a climate-change resolution at HSBC alongside 117 individual shareholders urging the bank to set targets to cut exposure to fossil fuels. HSBC later that year committed to phasing out coal financing, and in 2022 pledged to stop financing new oil-and-gas fields.

HSBC, like other banks, has faced repeated calls to completely end funding for the fossil-fuel sector and do more to finance the expensive transition toward a carbon-free future. A report from McKinsey calculates that a net-zero transition would require about $275 trillion of capital spending between 2021 and 2050, or about 7.5% of global gross domestic product.

With public funding limited, pressure is on the private sector to step up to fill the financing gap. Many financial institutes have set carbon-reduction and other climate goals over the past years, not least due to the rise of regulations in places like the European Union and Australia that are increasingly requiring companies to disclose sustainability efforts.

There is doubt about whether such pledges are having an impact. A recent report published by the European Central Bank that looked at voluntary climate commitments by banks found little evidence that they have been effective, suggesting that voluntary private-sector initiatives have relatively little impact on decarbonization.

A ShareAction analysis of Europe's largest 20 banks last year flagged what it said was a widespread lack of transparency around green finance and the related risk of "greenwashing"--when companies make exaggerated or unsubstantiated ESG claims.

The report said 35% of the banks measure the "real" impact of their financing, such as how much renewable-energy capacity their funding generates. Most targets set by lenders specify a sum of money but don't provide crucial details, making it hard to determine if lenders are pulling their weight, ShareAction's report said.

HSBC said in its 2023 ESG report that it was tracking progress in its plan to allocate up to $1 trillion to sustainable finance and investment by 2030, and has taken steps to align financed emissions to net zero by 2050.

HSBC doesn't currently disclose a target for capital deployment. It said in the ESG report that since 2015, it has issued more than $2 billion in green bonds for renewable energy, clean transport and other projects.

Write to Fabiana Negrin Ochoa at [e-mail]

(END) Dow Jones Newswires

05-03-24 0515ET