Simon Jessop, Lawrence White

LONDON, (Reuters) HSBC Europe, Europe’s top banker to Corporate Asia laid out Tuesday its long-awaited policy for financing thermal coal and stated that it expects all of its clients to have a plan to get rid of the fossil fuel by 2023.

As governments in Asia look to shift away from coal, which is widely used and cheap but also high-carbon, they are battling with each other.

According to HSBC, the plan will decrease exposure to thermal co-finance by at most 25% by 2025 and half by 2030. Clients that aren’t EU- or OECD-based may still be funded through a global phaseout in 2040.

HSBC said that it would continue to honor an existing promise not to fund new thermal coal mines or coal-fired power plants, and help reduce existing coal use.

We must tackle the difficult issues head-on. One of the biggest issues is coal. “It contributes 25% global greenhouse gas emission,” Celine Herweijer (HSBC Group Chief Sustainability Officer) said.

“It is not enough to have no new coal policy. Along with the scientific timelines, we need to focus our attention on the urgent removal of coal.

HSBC, Europe’s most important bank, has been subject to activists and investors to decrease funding for those who use coal. It is one of the worst fossil fuels.

MAIN DRIVER FOR GLOBAL WARMING

At the most-recent round of global climate talks https://www.reuters.com/article/climate-un-idCNL1N2S405F in Scotland last month, governments for the first time acknowledged that fossil fuels were the main driver of global warming, although coal-dependent countries, including India and China, would only agree to “phase down” coal-fired power.

HSBC had, along with its peers, previously made a commitment at a high level to achieve net zero carbon emissions for its customers by 2050. However, activists have criticized the policy’s strength and details.

Some investors supported a shareholder vote at this company’s annual meeting to support the plan, but they stopped the threat when the company promised to provide details about coal by the end.

HSBC announced that the new policy it had adopted would be applicable to all its businesses, which includes its asset management division, valued at $621 million, and will cover financing in all its aspects, such as advisory services and refinancing.

According to the bank, it will announce next year a science-based goal for coal-fired energy in order to limit global warming at 1.5 degrees Celsius (2.7 Fahrenheit). Progress on cutting thermal coal financing will be made public each year.

According to the bank, it will withdraw its services to any client who seeks expansion of thermal coal production beyond Jan. 1, 2021. It also won’t finance clients on EU/OECD market where thermal coal accounts for more than 40% or 30% by 2025, unless money is used specifically for clean technology and infrastructure.

While Natwest and Standard Chartered (OTC) have set higher targets than their peers, HSBC has a greater exposure to clients who rely heavily on coal. HSBC says that it must work with these clients to shift towards greener energy.

“What is going to make or break the world’s ability to reach this 1.5 degree target? (For) Asia’s energy transition to occur at the speed and scale that it needs, and we must be involved in shaping that.

We have to make sure that our clients who are energy advocates have enough time and ability to move to unabated zero coal over the next 18-years.

Unabated coal is coal that’s been burnt but not captured as carbon dioxide.

HSBC stated that it will evaluate clients from outside the EU/OECD before determining whether or not to finance them. This acknowledges the many infrastructure, policy and resources obstacles faced by these clients as compared to those in developed market countries.

HSBC stated that it expected clients to create their own transition plans. However, ShareAction and other campaigners have said previously such language would give HSBC too little leeway.

Herweijer stated that the “spirit” of the policy would include intermediaries as well as the parent group for any clients that fall outside of it. HSBC would request a guarantee that no money would flow to such entities.

Herweijer explained that they don’t expect every client to have an effective transition plan. In such cases, she said that we would have to end those relationships.