Industry Updates

HSBC AM outlines plans to phase out thermal coal investments by 2040

The group will engage with all thermal coal issuers in its ETF portfolio by the end of 2025

Theo Andrew

a man in a suit

HSBC Asset Management has outlined plans to phase out thermal coal from its global holdings by 2040.

The asset manager said it will engage with its passive and active holdings to support the transition away from coal-fired power and coal mining in the European Union by 2030 and globally a decade later.

The publication of its plans comes after investors raised concerns over its net-zero commitments after the UK asset manager’s former global head of responsible investments Stuart Kirk questioned whether it was financial markets’ job to worry about climate change.

Kirk resigned in July stating the bank’s behaviour towards him since his comments had made his position “unsustainable”.

Under its proposals, the firm aims to engage with all companies that make over 10% of revenue from thermal coal within its ETF portfolios by the end of 2025, voting against chairs of companies whose transition plans remain inadequate and those who do not provide Task Force on Climate-related Financial Disclosures.

HSBC AM added it will give itself the option of divesting from a company over time if its plans are incompatible with its net-zero objectives.

Furthermore, the group said it will not launch a new ETF or index fund with more than 2.5% exposure to thermal coal issuers, except for strategies with Paris-aligned 1.5°C objectives or clear divestment pathways.

HSBS AM added it will work with index providers to extend the range of passive products that do not have exposure to thermal coal.

Nicolas Moreau (pictured), CEO of HSBC AM, said: “We are working on two fronts: coal phase-out will go hand-in-hand with pioneering new investment solutions in our alternatives business 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.”

HSBC AM’s CEO Moreau: We need to be more outcome-driven on ESG

The policy, which will be reviewed on an annual basis, is in line with the Net Zero Asset Managers initiative and follows HSBC’s wider ambition to align its financed emissions to net-zero by 2050. 

HSBC AM will use the Transition Pathway Initiative to assess companies’ progress with the transition.

The ETF issuer has been keen to highlight its climate credentials over the past year launching several Paris-aligned and sustainable ETF strategies, including the HSBC World ESG Biodiversity Screened Equity UCITS ETF (HBDV) launched last month.

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