Slothful progress as HSBC announces coal phase-out and money managers’ climate voting records revealed

With omicron doing its damnedest to muck everything up, a shot of something that looks like vaguely good news is very much to be welcomed. An unlikely source – HSBC – has popped up with something vaguely like that.

The giga-bank, the biggest broker to corporate Asia, has told its clients they must come up with plans to exit coal by 2023 if they want to carry on doing business with it.

HSBC says it will “decline new financing, refinancing or advisory services to any thermal coal related client that fails to show a credible transition plan within an acceptable time- frame”.

As a major financier of that most destructive of fuels, here is something to cheer, right? We-ell remember the “vaguely” part.

HSBC will cut exposure to thermal coal financing by at least 25 per cent by 2025 and 50 per cent by 2030. But non-EU or non-OECD-based clients could be funded until a global phase-out by 2040.

This “lacks urgency”, said ShareAction, a responsible investment group. Which is a pretty good summation.

HSBC has a picture of a forest on the sustainability part of its website. It has maybe added a tree or two to it. But this is far from the sort of rapid action required to keep the planet from becoming an oven.

The corporate sector seems set upon rivalling the world’s governments when it comes to woolly climate pledges.

Ditto the big investment houses, which fuel companies with the financing they require, despite the damaging economic impact the climate crisis is going to have on the returns available to them and their clients.

They too have issued a lot of pretty words, vague pledges and faux concern.

Share Action will today publish its latest assessment of their voting records, which finds “scant improvement in fund managers’ voting on ESG resolutions”. That would be environmental, social and governance. Which investment houses and corporates both like to pretend they care about without providing much in the way of evidence to support the assertion.

Just 30 out of 146 ESG resolutions (21 per cent) received majority support the most recent voting season and the 51 asset managers assessed in both 2020 and 2021 increased their proportion of votes in favour by just 4 percentage points.

True some individual managers showed more rapid improvement. Credit Suisse and Nordea respectively increased their percentage of “for” votes by 61 percentage points each, supporting 77 per cent and 91 per cent of the ESG resolutions they were presented with this year. Get you to the head of the class!

BlackRock, the world’s largest asset manager which has started to make noise on climate related issues, supported 40 per cent of the assessed resolutions this year, compared to just 12 per cent last year.

It clearly has a blind spot when it comes to issues such as executive pay, gender pay, employee representation at board level, public health and weapons where it always, or nearly always, voted no on resolutions tabled with its investee companies. But progress is still progress.

The problem is, the fund management industry overall is still moving at about the rate of a tired sloth that fancies a nap after having consumed a snack.

This matters. ShareAction highlights the case of infrastructure company, Sempra Energy, which has been taking heat for lobbying against energy efficiency standards.

A shareholder resolution requested that its board issue a report describing how these activities align with the goals of the Paris Climate Agreement and how Sempra plans to mitigate risks presented by any misalignment.

BlackRock, Vanguard and State Street, the world’s top three asset managers, all voted against. Had one of them changed their votes, it might have passed.

It amounts to their saying “carry on, nothing to see here”. This despite ISS and Glass Lewis, proxy voting advisors hired by big money managers to help with voting decisions, recommending votes in favour.

Look, the situation is still improving. Just as with HSBC’s move, that’s something and something is better than nothing.

It is also worth noting UK and European fund managers have been moving the dial. Groups like Follow This, made up of green shareholders who hold stock in oil companies with a view to submitting and backing climate resolutions and forcing change, has been seeing increased support for its motions in votes too.

So there is some vaguely good news to be had re the climate, and ESG more generally. Just not enough to give either HSBC or the world’s big investment institutions much in the way of credit.