HSBC Asset Management unveiled a new policy today to phase out its investments in coal-fired power and thermal coal mining, with plans to ramp engagement with companies on transitioning away from thermal coal, and to divest from companies over time with inadequate transition plans.

Under the new policy, HSBC AM aims to exclude thermal coal companies in EU and OECD countries from its active funds by 2030, and globally by 2040.

In its passive funds, the company will ensure that all new exchange traded funds and index funds have no more than 2.5% exposure to thermal coal issuers, unless the fund strategy has Paris-aligned 1.5°C objectives or clear divestment pathways.

Nicolas Moreau, CEO, HSBC Asset Management said:

“This is a determined step to phase out thermal coal. Global emissions will only be reduced if there is concerted collaboration to meet the goals of the Paris Agreement and we are committed to playing our part. We have already stopped direct investments in new or existing thermal coal projects. 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.”

The company stated that the new policy marks an important step towards HSBC Group’s net zero ambitions, and contributes to the company’s plans to phase out coal-fired power and thermal coal mining. HSBC Group set a target in 2020 to align its financed emissions to net zero by 2050, and last year introduced a policy to phase out its financing of coal-fired power and thermal coal mining, targeting exits by 2030 in EU and OECD markets and by 2040 worldwide. The new policy also aligns with HSBC AM’s commitments as part of the Net Zero Asset Managers initiative.

As part of the new policy, HSBC AM aims to engage with all listed issuers with more than 10% revenue exposure to thermal coal in its active portfolios by the end of 2023, and in all ETF and index portfolios by the end of 2025, with the option of divesting over time from companies whose transition plans are considered incompatible with the firm’s climate goals. The asset manager will vote against chairs whose company’s transition plans remain inadequate following engagement, or for chairs of issuers with more than 10% revenue exposure to thermal coal which do not provide TCFD disclosures or equivalent reporting.

In addition, the company said that its managed portfolios will not participate in IPOs or primary fixed income financing by issuers engaged in thermal coal expansion, effective immediately.

Moreau added:

“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 don’t or won’t take active credible steps to reduce emissions.”