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Press release: 11 February 2021
ClientEarth lawyers have reminded HSBC board members of their legal duties in regards to climate risk as Europe’s second largest fossil fuel financier considers whether to support a major climate change resolution ahead of its next Annual General Meeting.
The resolution, filed by ShareAction last month, calls on the bank to take urgent action to scale back its exposure to fossil fuel assets in line with the timeline set out by the Paris climate agreement.
As a customer of HSBC and an environmental law charity, ClientEarth strongly supports the resolution. In a letter to the bank, ClientEarth has urged board members to recommend investors vote in its favour, emphasising the reputational, legal and financial risks of not taking progressive action on climate change.
The UK bank recently announced its ambitions to be aligned with the Paris Agreement goal to be net zero by 2050. But as a major financier of fossil fuels, providing more than US$86.5 billion in lending and underwriting since the Paris Agreement, ClientEarth lawyers have questioned the credibility of these statements if they are not soon backed by a strategy to reduce HSBC’s exposure to polluting industries, with clear short, medium and long-term targets.
ClientEarth lawyer Jamie Sawyer said: “It is not enough to declare net-zero ambitions; HSBC must explain how they will achieve them. The directors have both legal and moral duties to consider the bank’s impact on the environment and mitigate the risks of climate change.
“Inaction will not only jeopardise HSBC’s own financial health, but will exacerbate the systemic impacts the crisis will inflict on the entire economy. We urge board members to show real leadership in responding to the climate emergency and support the resolution.”
ClientEarth also argued that knowingly continuing to support businesses that are failing to reduce their warming impacts makes HSBC complicit in the environmental and economic damage they cause, and heightens the risk of greenwashing.
The lawyers said that preparing a Paris-aligned strategy supported by targets and transparently reporting against progress would be “clearly in the best interests of HSBC”, stressing that directors’ duties require and empower board members to act.
“Around the world, governments, investors, businesses and the public are rapidly raising their ambitions on climate action – HSBC’s response falls below the benchmark. If it is serious about transitioning to net zero emissions then it must move quickly to address the current gap and implement a Paris-aligned strategy supported by targets in line with emerging market practice,” Sawyer added.
Under the UK Companies Act, board members are required to act in way that is most likely to promote the success of the company. In doing so, they must have regard to:
The resolution, spearheaded by responsible investment campaigners ShareAction, was filed together with over 100 institutional and private co-filers in January. It called on HSBC and its directors to set and publish a strategy with short, medium and long-term targets to reduce its exposure to fossil fuel assets on a timeline aligned with the goals of the Paris Agreement, starting with coal. The bank’s shareholders will vote on the resolution at HSBC’s upcoming Annual General Meeting.
ClientEarth is a customer of HSBC and as such will continue to engage with the bank and call on its decision makers to bring the institution’s response to climate change in alignment with the goals of the Paris Agreement.
ClientEarth is a charity that uses the power of the law to protect people and the planet. We are international lawyers finding practical solutions for the world’s biggest environmental challenges. We are fighting climate change, protecting oceans and wildlife, making forest governance stronger, greening energy, making business more responsible and pushing for government transparency. We believe the law is a tool for positive change. From our offices in London, Brussels, Warsaw, Berlin and Beijing, we work on laws throughout their lifetime, from the earliest stages to implementation. And when those laws are broken, we go to court to enforce them.