LGPS funds pressure HSBC to reduce fossil fuel exposure

Local Government Pension Scheme (LGPS) funds are among the 15 institutional investors to have backed a call by ShareAction for HSBC to reduce its exposure to fossil fuels.

Brunel Pension Partnership, Merseyside Pension Fund, Islington Pension Fund and Denmark’s AkademikerPension are part of the group, which have a combined $2.4trn (£1.8trn) in assets under management and have filed a climate change resolution at HSBC alongside 117 individual shareholders.

This resolution, which was coordinated by ShareAction, calls on the bank to publish a strategy and targets to reduce its exposure to fossil fuel assets, starting with coal, on a timeline consistent with the Paris climate goals.

If the resolution receives more than 75 per cent of the votes at HSBC’s annual general meeting in April 2021, it would require the bank to publish a strategy and short-, medium- and long-term targets to reduce its exposure to fossil fuel assets.

According to Rainforest Action Network, HSBC is Europe’s second largest financier of fossil fuels and provided $87bn to some of the world’s largest fossil fuel companies in the three years following the signing of the Paris Agreement.

The banking group did announce an ambition to reach net zero by 2050, but campaigners criticised it for making no commitment to reduce funding for fossil fuels, in particular coal, which has risen each year since 2016.

ShareAction stated that, in the four months leading up to its announcement, the bank pumped an additional $1.8bn into fossil fuel companies, which it said had “cast serious doubt over the credibility of HSBC’s climate commitments, given that phasing out financing of fossil fuels is an absolute must for any net-zero strategy”.

Brunel CEO, Laura Chappell, said: “We believe this resolution will enable the bank to meet the Net Zero ambition it set out. Banks are the biggest lenders, and so it is crucial for investors to engage with them on this issue, as climate change risk assessment needs to happen along the whole financial chain.

“As Europe’s second–largest provider of fossil fuel financing, HSBC now needs to set tangible medium- and short-term targets to help turn their net zero ambition into reality.”

AkademikerPension CEO, Jens Munch Holst, commented: “HSBC’s strong presence in Asia will be critical in encouraging a much-needed transition away from coal dependency in that region, while at the same time increasing HSBC’s own resilience to climate risk.

“We urge HSBC to listen to its shareholders by introducing robust fossil fuel project and corporate finance restriction criteria and publishing a 1.5°C-aligned engagement policy for its clients in high-carbon sectors.”

ShareAction senior campaign manager, Jeanne Martin, added: “The message from the resolution is clear: net zero ambitions by top fossil fuel financiers are simply not credible if they fail to be backed up by fossil fuel phase out plans.”

In response, an HSBC spokesperson said: “HSBC is strongly committed to addressing climate change, in line with our clear ambition to align our financed emissions of our entire business portfolio to net zero by 2050 or sooner.

"We are a leader in sustainable finance and expect to provide between $750bn and $1trn in finance by 2030 to support our customers in all sectors to progressively decarbonise. As we work to set out the detail of our roadmap to net zero, we continue to positively engage with our customers, shareholders and ShareAction.”

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