Investors Seek Clarity on Banks’ Green Finance
HSBC AGM sparks controversy as ShareAction flags continued lack of targets and transparency over sector’s sustainability claims.
NGO ShareAction has declared it will continue to aid investors in their push for transparency into HSBC’s green finance investment pledge, highlighting endemic issues across the banking sector.
The decision followed the HSBC’s most recent AGM, at which a coalition of shareholders requested the bank explicitly set out how it intends to use the money it has earmarked for sustainable finance and establish a renewable energy funding target. HSBC has previously said it would target between US$750 billion and US$1 trillion by 2030.
The 16-strong investor group that asked the question during HSBC’s AGM represents US$892 billion in assets, including the likes Ethos Foundation, Epworth Investment Management, Royal London Asset Management, and Sweden’s Folksam pension fund. Following the meeting, HSBC agreed to meet with ShareAction and investors to discuss its green finance strategy before the 2025 AGM.
Jeanne Martin, Head of Banking Programme at ShareAction, told ESG Investor that the news was “broadly very positive” as it showed the bank’s willingness to consider investor expectations and demands on green finance.
“What we’d like to achieve is a bit more of a conversation, and really clarify what we’re after by providing context to our requests,” she added. “We also want the bank to hear from shareholders directly. It’s one thing to hear from ShareAction, but it’s another to really get confirmation that they care about this issue and want to see the bank move on green finance.”
By the end of the 2024 AGM season, ShareAction will have asked a total 24 questions at the AGMs of 17 European banks this year, including eight specifically focused on green finance. The advocacy has indicated its intention to attend the upcoming AGMs of BNP Paribas (14 May), Crédit Agricole and Société Générale (22 May).
Industry-wide issue
Last November, research from ShareAction found that Europe’s top 20 banks – including HSBC – successfully promoted their green finance credentials, but lacked transparency on green finance activity, leaving them and their investors exposed to greenwashing allegations.
“As investors, we are looking for as much transparency as possible from our portfolio companies, [and] clearly defined targets help us understand and evaluate their climate ambitions,” said Emilie Westholm, Head of Responsible Investment at Folksam. “HSBC has made good progress in its climate work in recent years, but we think that its sustainable finance target could be further clarified in terms of where the money will be allocated.”
While ShareAction noted HSBC’s solid reporting on how the money has been allocated after the fact, it said investors currently had no view over the bank’s sustainable finance ambitions across environmental and social themes.
“The lack of targets and transparency across the industry is very concerning, and means banks make big claims on green finance that they don’t actually back up with the necessary evidence for shareholders,” said Martin. “If investors are not able to understand what banks are actually financing, it’s hard for them to know the scale of risk that they might be exposed to, either by investing in banks directly or investing in companies that are receiving financing from them.”
Andrew Harper, Chief Responsibility Officer at Epworth, pointed to targets made by other banks as examples for HSBC to follow.
For instance, Crédit Agricole’s has committed to triple its financing of renewable energy and multiply its financed terawatt hours of renewable energy by 3.6 times by 2030. Meanwhile, fellow French bank BNP Paribas has set a target for renewables to make up at least 66% of its power generation portfolio, and electric vehicles at least 25% of its automotive portfolio, by 2025.
“Ideally, we would like to see HSBC emulate the proactive initiative of these two banks as much as it feasibly can,” said Harper. “We ultimately want to see greater transparency regarding the bank’s climate targets, which include measurable, tangible goals in order to enable us as responsible investors to hold these institutions more accountable.”
Anything short of transparent and measurable goals leaves a risk that HSBC may simply be engaging in a marketing exercise and greenwash, Harper explained. “We’d like to think the bank is better than this, but its track record on climate claims doesn’t fill us with confidence,” he added.
Curtailed questions
Beyond its green credentials, HSBC also sparked backlash on the brevity of its AGM – which was cut short by 30 minutes – and on its failure to field questions from all shareholders during the meeting. This included a question from the Church of England Pensions Board, which was submitted ahead of time, as well as questions from EQ Investors and Jesuits in Britain.
“A couple of investors were not able to ask their questions. We think that is poor behaviour from HSBC and definitely not one that we have observed at other bank’s AGMs,” said Martin. “An AGM is often the annual event for smaller shareholders to have a direct conversation with their company holdings and senior management teams. HSBC should have allowed them to ask their questions – especially because the AGM was not even that long.”
At the AGM, HSBC shareholders also voted to remove a cap on bankers’ bonuses, which could hold implications for both executive and fair pay.
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