ShareAction is putting investors climate commitments to the test with HSBC resolution

With everything that’s going on in the world, the climate crisis has struggled for coverage and that needs to change because it could ultimately make the current pandemic look like a tea party. 

Fortunately there exist a number of groups that have it at the forefront of their agendas. One of them is ShareAction, which has today published the details of a climate resolution filed with HSBC ahead of the bank’s AGM.

In October the bank set out what it described as “an ambitious plan to prioritise financing and investment that supports the transition to a net zero global economy”.

The statement can be viewed on its website where it’s topped by a picture of an evergreen forest, which looks very pretty.

Share Action says that’s nice but we want to see you making a commitment to reduce your financing of fossil fuel companies too. The Rainforest Action Network (RAN) found you had provided $87bn (£64bn) to some of the world’s biggest since the signing of the Paris Agreement and we’d like you to stop so the planet doesn’t, you know, burn.

To that end, the resolution authorises and directs the company and its directors to “set and publish a strategy and short-, medium- and long-term targets to reduce its exposure to fossil fuel assets on a  timeline aligned with the goals of the Paris (Climate) Agreement”.

The bank would also be required to publish progress reports against the strategy from 2022 onwards.

This isn’t simply a matter of ShareAction, a responsible investment NGO, getting a few niche green investment managers and some individual shareholders to sign on such that the bank can’t airily wave it away with some platitudes about how it’s already working jolly hard on the issue so let’s move swiftly on to approving the executives’ bonuses.

ShareAction has secured the support of some big guns. At the top of the list is Amundi, the biggest fund manager by assets under management in France, and Europe, and among the top 10 in the world.

There’s also Man Group, the world’s largest publicly traded hedge fund manager, wealth manager Rathbone Brothers, and various other money managers, foundations and pension schemes along with approaching 200 individual shareholders.

While that’s welcome, it shouldn’t come as a huge surprise. UK and European asset managers have a decent record when it comes to backing these resolutions, even where they don’t directly sign up to them. There’s been a growing recognition among them that the climate crisis is deadly serious and threatens, among other things, to have a serious and highly negative impact on the global economy and thus their investment returns if it isn’t tackled.

The problem is that HSBC is a truly global bank with a truly global shareholder base. And that’s where it gets interesting. The US based BlackRock, the world’s biggest asset manager, has recently made a big fuss about putting the climate crisis at the centre of its business and changing its voting behaviour to match that.

CEO Larry Fink even wrote to CEOs telling them climate risk was an investment risk and stating his belief that we are “at the edge of a fundamental reshaping of finance”.

Fine and dandy. But it remains a fact that previous analyses of investor voting behaviour as regards climate resolutions have not looked favourably on the performance of US money managers.

It is, of course, always possible that HSBC will accept the resolution. Ahead of its publication today it issued would could be considered as a mildly encouraging statement expressing its “strong commitment” to addressing climate change and saying it would continue to engage with customers, shareholders and ShareAction

If HSBC follows that up by signing up, it would represent a very welcome step. However, should it require a gentle push from its investors the role of BlackRock, whose name features prominently on the shareholder register, could prove crucial. 

This could serve as an important test of the latter’s commitment to addressing the climate crisis, particularly given that what ShareAction and its co-signatories are asking for isn’t at all unreasonable.