The Board has oversight of the Group’s sustainability and ESG initiatives, while the Group Management Board is accountable for their delivery, reflected in sustainability targets within the long-term incentive (LTI) scorecards for executive Directors. The 2018 LTI scorecards of executive Directors included an ESG measure based on a rating from Sustainalytics, a third-party sustainability ratings agency. At 31 December 2019, HSBC achieved a medium ESG risk rating using the new Sustainalytics methodology. HSBC’s rating outperformed compared with a peer set that included 10 global banks, three emerging markets-based banks and one Asia-Pacific-based bank. The 2019 LTI scorecard includes a customer measure incentivizing progress in meeting customer-linked business objectives.
In 2019, the Board held a one-day sustainable finance and climate change ‘master class’; the Group Risk Committee carried out a thematic review of sustainability and climate change risk management; and the Group Audit Committee discussed ESG at four separate meetings.
HSBC has embedded climate risk within its broader risk management processes. Group Sustainability Risk (part of the Global Risk function) is responsible for managing sustainability risk policies (covering agricultural commodities, chemicals, defence, energy, forestry, mining and metals, UNESCO World Heritage sites, and Ramsar-designated wetlands) and application of the Equator Principles. As with climate risk management, they seek to partner with customers to improve their operating standards on sustainability.
They developed a transition risk questionnaire with customers to improve their understanding of climate transition strategies. This is helping to identify which customers need to adapt rapidly to climate-related risks, and spot potential business opportunities. In time, this information will be incorporated into an initial assessment of transition risk within the HSBC credit risk management processes.
HSBC has publicly available sustainability risk policies covering various sectors which seek to ensure that the financial services it provides to customers do not result in an unacceptable impact on people or the environment. Their assessment of environmental and societal benefits considers the balance of impacts in determining overall net benefit.
They are committed to disclosure and serve as a corporate member of the United Nations Global Compact (UNGC) whose work aims to promote and facilitate corporate reporting on the SDGs. They report on the emissions of their own operations via CDP (formerly the Carbon Disclosure Project). They have developed a Data Dictionary that outlines the activities contributing to their $100 billion Sustainable Finance and Investment commitment. They publish their progress against the commitment in their Annual Report and ESG Update (along with their TCFD report and their Green Bond and SDG Bond Annual Progress Reports).
HSBC are building the knowledge and capabilities of their people through continued training and engagement. They introduced a new series of learning modules on sustainability through the online HSBC University for all employees, as well as tailored sustainability training sessions for key customer-facing employees and people in risk management roles. In 2019, more than 5,300 modules were completed within the seven-part online sustainability learning course.
They are embedding sustainability into the products and services they offer to customers, including access to capital markets, lending, transaction banking, advisory services, and investments. Having already established sustainable offerings through their range of green bonds, in 2017 they launched the world’s first bond that specifically supports the UN SDGs. This $1 billion bond is aligned to seven of the goals, including a commitment to renewable energy, building sustainable cities and improving access to fresh water and sanitation. In 2019 HSBC supported several green bond issuances that were market firsts in the public and private sectors, including as joint lead manager for the inaugural sovereign green bonds for Hong Kong and the Republic of Ireland.
HSBCs’ Centre of Sustainable Finance provides sustainability related thought-leadership and innovation and to support client engagement. In 2019, the Centre published 45 reports and articles, nearly twice the number compared with the previous year, and attracted over 100 000 page views. For a sixth consecutive year, HSBC were ranked first in 2019 for climate change research by Extel, as well as number one for SRI and Sustainability. In addition, their businesses provided a number of reports to help inform customers on sustainability considerations, including low carbon transition scenarios.
They work with regulators, international organizations and civil society to help them deliver effective regulations and governance for customers, the financial services industry and wider society. They also seek to improve the financial capability and employability of their own people and those living within the communities in which they operate. They work with non-profit partners to help us reach into communities of particular need. Their ESG Steering Committee regularly discusses the new and existing themes and issues that matter to the stakeholders. The management team then uses this insight, alongside the framework of the ESG Guide to choose what they measure and publicly report in their ESG Update.
