HSBC Asset Management is phasing out thermal coal investments in its public holdings and will work with companies to support their transition away from thermal coal.
The asset manager also said in a news release that corporate directors not showing "credible plans" to transition from thermal coal in European Union and Organization for Economic Cooperation and Development markets by 2030 and globally by 2040 could risk votes against its directors or even divestment.
The manager's parent company HSBC Holdings had $2.98 trillion in assets as of June 30.
HSBC has already stopped direct investments in new or existing thermal coal projects. The new policy is in line with the Net Zero Asset Managers initiative of which HSBC AM is a signatory. The action follows a 2020 pledge by the HSBC to align the amount of greenhouse gas emissions that it finances to net-zero by 2050. Phasing out thermal coal "is an important step towards the bank achieving its net-zero ambition," it said in the news release.
Among its actively managed portfolios, the new policy calls for holding public companies with no more than 2.5% revenue exposure to thermal coal in EU/OECD markets by 2030 and globally by 2040. It is applicable to all portfolios for which HSBC AM has investment discretion and funds for which HSBC AM has significant control.
As of Thursday, those portfolios will not participate in initial public offerings or primary fixed-income financing by issuers engaged in thermal coal expansion. Other issuers with more than 10% revenue exposure will be subject to enhanced due diligence of transition plans, HSBC said.
Passive funds, new ETFs or index funds will be limited to less than 2.5% exposure to thermal coal issuers, unless the strategy has specific Paris-aligned 1.5 degrees Celsius objectives or clear divestment pathways.
HSBC AM said it will work with index providers to extend the range of indexes and passive products without exposure to thermal coal, and actively work with company boards to support the transition away from thermal coal.
Nicolas Moreau, CEO of HSBC AM, described the policy as "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," Mr. Moreau said in the release.
The asset manager is working on "two fronts," he said: phasing out coal and pioneering new investment solutions in its alternatives business to scale sustainable infrastructure investment and venture capital for climate technology solutions.
"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," Mr. Moreau said.