HSBC has tabled a resolution that commits to phasing out financing of coal-fired power and thermal coal mining by 2030 in the EU and Organisation for Economic Co-operation and Development (OECD) countries, and elsewhere by 2040.

The resolution, which will be put to a vote at HSBC's upcoming annual general meeting on 28 May, follows "months of negotiations" between HSBC and a coalition of investors led by ShareAction.

This coalition, which includes a number of Local Government Pension Schemes, such as Brunel Pension Partnership, previously filed a shareholder resolution with the bank, calling for it to reduce its exposure to fossil fuels.

However, the group has now agreed to withdraw this resolution in exchange for the board-backed resolution announced by HSBC, although it warned that further action may be taken next year if it is unsatisfied with the bank’s implementation of the new commitments.

These commitments include setting, disclosing and implementing a strategy with short- and medium-term targets to align its provision of finance across all sectors, starting with oil and gas and power and utilities, with the goals and timelines of the Paris Agreement.

Alongside this, the resolution includes a commitment to publish 2025 and 2030 targets for HSBC's ‘oil and gas’ and ‘power and utilities’ portfolios by the end of 2021, and to use 1.5C pathways that are not overly reliant on Negative Emissions Technologies to do so.

It will also publish a policy to phase out the financing of coal-fired power and thermal coal mining by 2030 in markets in OECD countries, and by 2040 elsewhere, later this year.

ShareAction has said that this makes HSBC the first mainstream bank to take such a stance on negative emissions technologies, describing it as a "landmark climate commitment".

More broadly, ShareAction senior campaign manager, Jeanne Martin, highlighted the announcement from HSBC as evidence that robust shareholder engagement can deliver concrete results, and an “important precedent” for the banking industry.

She stated: "Net zero ambitions have to be backed up with time-bound fossil fuel phase-outs and today HSBC has taken an important step in that direction.

“Our focus now turns to ensuring it delivers on these commitments. HSBC must ensure that its coal phase-out policy, to be published before the end of the year, includes a clear commitment to stop financing coal developers and top coal companies and to ask its clients to publish their own coal-phase out plans by 2023 at the latest.”

Brunel Pension Partnership has also welcomed the special resolution, clarifying however, that "ongoing engagement is key".

It stated: "We encourage shareholders to support it so that the votes reach 75 per cent, the threshold needed to make it binding.

"Engagement is how we have got this far, and it is how we plan, as a coalition of investors, to get a lot further. We look forward to working with the board and executive team as they move forward with delivering on their commitments."

Indeed, the investor coalition, which is also backed by Europe's largest asset manager, Amundi, wrote to HSBC earlier this week, in order to stress the importance of implementation of these commitments.

The letter stated: “The focus now must be on putting these plans into practice. We look forward to working with the Board on the development of its targets and plans.”

The group has highlighted HSBC’s coal phase-out as "particularly urgent", requesting that the bank publish a coal policy by the end of 2021, which includes a prohibition of general corporate financing and underwriting to companies that are highly dependent on coal mining and/or coal power, as well as companies planning new coal mines, coal plants and coal infrastructure.

It has also called for a commitment to help clients develop, publish and implement coal phase-out plans in line with the 2030 timelines by a specific date, and no later than December 2023, and for the bank to focus on the entire coal supply chain, including manufacturers.

The letter concluded: “Whilst we have withdrawn the shareholder resolution this year, we may take further action next year if we are unsatisfied with the bank’s progress.

“In the meantime, we look forward to supporting the board and executive team as you move forward with delivering on these commitments.”

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