Our approach to ESG
We continue to work to incorporate
environmental, social and
governance principles throughout the organisation and to embed
sustainability into the way we operate.
Our purpose is: 'Opening up a world
of opportunity'.
Our purpose is guided by our values:
we value difference; we succeed together; we take responsibility;
and we get it done.
Our approach to ESG is shaped by our
purpose and values and a desire to create sustainable long-term
value for our stakeholders. We collaborate and aim to build strong
relationships with all of our stakeholders, which include the
people who work for us, bank with us, own us, regulate us, and live
in the societies we serve and on the planet we all inhabit to
deliver the ESG approach.
Transition to net zero
We have continued to take steps to
implement our climate ambition to become net zero in our operations
and our supply chain by 2030, and align our financed emissions to
net zero by 2050. In January 2024, we
published our net zero transition plan, which is an important
milestone in our journey to achieving our net zero ambition. The
plan will help our people, customers, investors and other
stakeholders to understand our long-term vision, the challenges,
uncertainties and dependencies that exist, the progress we are
making towards our own transition and what we plan to do in the
future.
In this ESG review, we publish
on-balance sheet financed emissions for thermal coal mining, in
addition to other sectors we have already been reporting on, noting
the challenge of evolving methodologies and data limitations. We
also publish combined on-balance sheet financed and facilitated
emissions for the oil and gas, and power and utilities sectors. We
expect to iterate and mature our approach to supporting sector
transitions over time. We also continue to work on improving our
data management processes.
We continue to review policy
implementation as we apply our policies in practice, and our
operationalisation of such policies continues to be
enhanced. We take a
risk-based approach when identifying transactions and clients to
which our energy and thermal coal phase-out policies apply, and
when reporting on relevant exposures, adopting approaches
proportionate to risk and materiality.
We are also working with peers and
industry bodies to help mobilise the systemic change needed to
deliver action on climate change, nature and the just
transition.
Building inclusion and resilience
Our social approach is centred
around fostering inclusion and building resilience for our
colleagues, our customers, and in the communities we
serve.
We are building a workforce that is
representative of the communities that we serve and we have targets
and programmes in place to ensure fair and inclusive recruitment
and to support the equitable progression of under-represented
groups. We also strive to create an inclusive and accessible
banking experience for all of our customers, and to help them
access the finance they need without unnecessary
barriers.
Employee resilience is central to
our success, so we provide a wide range of resources to support
colleagues' mental, physical and financial well-being, as well as
training and support so that they are equipped with the skills they
need to further their careers. We support customer resilience with
products, services and education that build their capabilities so
that they can understand their finances and manage them
effectively.
Acting responsibly
Our governance approach focuses on
acting responsibly and recognises topics such as human rights,
conduct and data integrity.
Our policies and procedures help us
to provide the right outcomes for customers, including those with
enhanced care needs, which in 2023 took into account pressures from
the increased cost of living. Customer experience is at the heart
of how we operate and is measured through customer satisfaction and
customer complaints.
We are continuing our journey to
embed ESG principles across the organisation, including
incorporating climate risks within the risk management framework,
training our workforce, incorporating climate-related targets
within executive scorecards, and engaging with customers and
suppliers.
Environmental - Transition to net zero
- In
January 2024, we published our net zero transition plan. This
provides an overview of the progress we have made to date and what
we plan to do next, although we acknowledge there is still much
more to do.
- We have
now set combined on-balance sheet financed emissions and
facilitated emissions targets for two emissions-intensive sectors:
oil and gas, and power and utilities, and report the combined
progress for both sectors.
Read more in the Environmental section on page 44.
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Social - Building inclusion and resilience
- In 2023,
34.1% of senior leadership roles were
occupied by women, with a target to achieve 35% by 2025, although
progress has not been as fast paced as we would have liked. We also
continued on a journey to meet our ethnicity goals.
- Employee
engagement, which is our headline measure, increased by three
points in 2023 and is now seven points ahead of the external
financial services benchmark.
Read more in the Building inclusion and resilience section on
page 75.
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Governance - Acting responsibly
- We
continue to raise awareness and develop our understanding of our
salient human rights issues. In 2023, we provided practical
guidance and training, where relevant, to our colleagues across the
Group on how to identify and manage human rights risk.
- We
were ranked as a top three bank against our competitors in
58% of our key six
markets, although we still have work to do to improve our rank
positions.
Read more in the Governance section on page 87.
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How we decide what to
measure
We listen to our stakeholders in a
number of different ways, which we set out in more detail within
the 'ESG overview' on page 14. We use the
information they provide us to identify the issues that are most
important to them and consequently also matter to our own
business.
Our ESG Committee and other relevant
governance bodies regularly discuss the new and existing themes and
issues that matter to our stakeholders. Our management team then
uses this insight, alongside the framework of the ESG Guide (which
refers to our obligations under the Environmental, Social and
Governance Reporting Guide contained in Appendix C2 to The Rules
Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited), and the LR9.8.6R(8) of the Financial Conduct
Authority's ('FCA') Listing Rules, and other applicable laws and
regulations to choose what we measure and publicly report in this
ESG review. Under the ESG Guide, 'materiality' is considered to be
the threshold at which ESG issues become sufficiently important to
our investors and other stakeholders that they should be publicly
reported. Our approach to materiality also considers disclosure
standards and other applicable rules and regulations as part of our
materiality assessment for specific ESG topics and relevant
disclosures.
Given the recent developments in the
ESG regulatory environment across various jurisdictions in which we
operate, combined with the relative immaturity of processes,
systems, data quality and controls, our focus remains on supporting
a globally consistent set of mandatory sustainability standards. We
aim to continue to evolve our reporting to recognise market
developments, such as the International Sustainability Standard
Board ('ISSB') or the Corporate Sustainability Reporting Directive
('CSRD'), and support the efforts to harmonise the disclosures. In
this Annual Report and
Accounts, we continue to report against the core World
Economic Forum ('WEF') Stakeholder Capitalism Metrics and
Sustainability Accounting Standards Board ('SASB') metrics, and
will continue to review our approach as the regulatory landscape
evolves.
Consistent with the scope of
financial information presented in our Annual Report and Accounts, the ESG
review covers the operations of HSBC Holdings plc and its
subsidiaries. Given the relative immaturity of ESG-related data and
methodologies in general, we are on a journey towards improving
completeness and robustness.
For further details of our material ESG topics, see 'Engaging
with our stakeholders and our material ESG topics' on page
15.
For further details of our approach to reporting, see
'Additional information' on page 439.
Our reporting around ESG
We report on ESG matters throughout
our Annual Report and
Accounts, including the 'ESG overview' section of the
Strategic Report (pages 14 to 19), this ESG review (pages 41 to 98), and the 'Climate
risk' and 'Insights from climate scenario analysis' sections of the
Risk review (pages 221 to 230). In addition, we have other supplementary
materials, including our ESG Data
Pack, which provides a more granular breakdown of ESG
information.
Detailed data
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Additional reports
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ESG Data Pack 2023, including
SASB Index 2023 and WEF Index 2023
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UK Pay Gap Report 2023
Modern Slavery and Human Trafficking
Statement 2023
Green Bond Report 2023
HSBC UN Sustainable Development
Goals Bond and Sukuk Report 2023
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For further details of our
supplementary materials, see our ESG reporting centre at
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
Assurance relating to ESG
data
HSBC Holdings plc is responsible for
preparation of the ESG information and all the supporting records,
including selecting appropriate measurement and reporting criteria,
in our Annual Report and
Accounts, ESG Data
Pack and the additional reports published on our
website.
We recognise the importance of ESG
disclosures and the quality of data underpinning them. We also
acknowledge that our internal processes to support ESG disclosures
are in the process of being developed and currently rely on manual
sourcing and categorisation of data. Certain aspects of our ESG
disclosures are subject to enhanced verification and assurance
procedures including the first, second and third line of defence.
Assurance assists in reducing the risk of restatement, although it
cannot be fully eliminated given the challenges in data, evolving
methodologies and emerging standards. We aim to continue to enhance
our approach in line with external expectations.
For 2023, ESG data is subject to
stand-alone independent PwC limited assurance in accordance with
International Standard on Assurance Engagements 3000 (Revised)
'Assurance Engagements other than Audits or Reviews of Historical
Financial Information' and, in respect of the greenhouse gas
emissions, in accordance with International Standard on Assurance
Engagements 3410 'Assurance Engagements on Greenhouse Gas
Statements', issued by the International Auditing and Assurance
Standards Board, on the following specific ESG-related disclosures
and metrics:
- our Green
Bond Report 2023 (published in December 2023);
- our
progress towards our ambition to provide and facilitate $750bn to
$1tn of sustainable finance and investment by 2030 (see page
49);
- our
on-balance sheet financed emissions for 2021 and 2022 for six
sectors, our on-balance sheet financed emissions for 2020 for
thermal coal mining, and our facilitated emissions for two sectors
for 2019 to 2022 (see page 61);
- our
thermal coal financing drawn balance exposures for 2020 (see page
67); and
- our own
operations' scope 1, 2 and 3 (business travel) greenhouse gas
emissions data (see page 64), as well as
supply chain emissions data.
The work performed for independent
limited assurance is substantially less than the work performed for
a reasonable assurance opinion, like those provided over financial
statements.
Our data dictionaries and
methodologies for preparing the above ESG-related metrics and
independent PwC's limited assurance reports can be found at
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
Environmental
Transition to net zero
We support the transition of our
customers, industries and markets to a net zero and a sustainable
future, while moving to net zero ourselves.
Our
approach to transition to net zero
Our net zero ambition represents one
of our four strategic pillars. In January
2024, we published our net zero transition plan. It provides an
overview of our approach to net zero and the actions we are taking
to help meet our ambition. It sets out how we are working to embed
net zero across key areas of our organisation to help ensure that
we can play a role in the transition to net zero in the markets we
serve.
Supporting our customers
To help achieve the scale and speed
of change required to transition to net zero, we know we need to
support our customers not just with finance, but with the services,
insights and tools to help them to transition. In
2023, we continued to provide sustainable financing and investment
to our customers in line with our ambition to provide and
facilitate $750bn to $1tn by 2030. We report our progress
against our 2030 financed emissions targets and our wider progress
towards net zero by 2050, including how we plan to engage with
customers in high-emitting sectors.
Embedding net zero into the way we operate
We take a risk-based, proportionate
and iterative approach to embedding net zero into our organisation,
focusing our efforts on where we can help drive material and
implementable change, and applying learnings as we go along. Our
approach will continue to mature over time with evolving science,
methodologies, industry standards and regulatory requirements, and
improvements in data and in technology infrastructure.
Partnering for systemic change
Our ability to achieve our own net
zero ambition is heavily reliant on the mobilisation of all
stakeholders, public and private, across multiple geographies. We
continue to support systemic change through new and existing
partnerships, and we engage through industry alliances and
initiatives to help build a supportive enabling
environment.
Impact on reporting and financial
statements
We have assessed the impact of
climate risk on our balance sheet and have concluded that there is
no material impact on the financial statements for the year ended
31 December 2023. The effects of climate change are a source of
uncertainty. We capture known and observable potential impacts of
climate-related risks in our asset valuations and balance sheet
calculations. These are considered in relevant areas of our balance
sheet, including expected credit losses, classification and
measurement of financial instruments, goodwill and other intangible
assets; and in making the long-term viability and going concern
assessment. As part of assessing the impact on our financial
statements we conducted scenario analysis to understand the impact
of climate risk on our business (see page 65). For further details of our climate risk
exposures, see page 221.
For further details
of how management considered the impact of climate-related risks on
its financial position and performance, see 'Critical estimates and
judgements' on page 343.
In
this section
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Overview
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Our
approach to the transition
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We aim to achieve net zero in our
financed emissions by 2050, and in our own operations and supply
chain by 2030.
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Page
45
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Understanding our climate reporting
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To achieve our climate ambition we
need to be transparent on the opportunities, challenges, related
risks and progress we make.
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Page
46
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Supporting our customers
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Sustainable finance and investment
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Our ability to help finance the
transformation of businesses and infrastructure is key to building
a sustainable future for our customers and society.
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Page
49
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Financed emissions
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We aim to align our financed
emissions to achieve net zero by 2050 and support our clients on
their transition.
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Page
53
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Embedding net zero into the way we operate
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Net
zero in our own operations
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Part of our ambition to be a net
zero bank is to achieve net zero carbon emissions in our operations
and supply chain by 2030.
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Page
63
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Managing climate risk
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We manage climate risk across all
our businesses in line with our Group-wide risk management
framework. Enhancing our climate change stress testing and scenario
analysis capability is crucial in identifying and understanding
climate-related risks and opportunities.
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Page
65
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Sustainability risk policies
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Our sustainability risk policies
seek to ensure that the financial services that we provide to
customers do not result in unacceptable impacts on people or the
environment.
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Page
66
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Partnering for systemic change
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Supporting systemic change to deliver net
zero
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We collaborate with a range of
partners to support the development of an enabling environment and
mobilise finance for nature and climate.
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Page
68
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Our
approach to climate reporting
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Task Force on Climate-related Financial Disclosures
('TCFD')
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Our TCFD index provides our
responses to each of the 11 recommendations and summarises where
additional information can be found.
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Page
69
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Our approach to the
transition
The Paris Agreement aims to limit
the rise in global temperatures to well below 2°C, preferably to
1.5°C, compared with pre-industrial levels. To limit the rise to
1.5°C, the global economy would need to reach net zero greenhouse
gas emissions by 2050. We are working to achieve a 1.5°C-aligned
phase-down of financed emissions from our portfolio.
In October 2020, we announced our
ambition to become a net zero bank by 2050 and in 2021 we included
the transition to net zero as one of the four key pillars of our
corporate strategy.
Our starting point in the transition
to net zero is one of a heavy financed emissions footprint. Our
history means our balance sheet is weighted towards the sectors and
regions which matter the most in terms of emissions, and whose
transitions are therefore key to the world's ability to reach net
zero on time. This means we will have a complex transition, with
markets and sectors at different starting points and moving at
different speeds. However, it also provides us with an opportunity
to work with our customers to help make an impact - in both the
emissions challenge and the financing challenge.
Responding to the challenges and
opportunities presented by net zero requires us to work across HSBC
to implement and embed our net zero approach, to manage associated
risks, and to help sustain and grow value for our customers, our
shareholders and our wider stakeholders. We want to make financing,
facilitating and investment choices that can lead to a meaningful
impact on emissions reduction in the real economy, not just in our
portfolio. This requires engaging with our customers on their
transitions to help finance decarbonisation in the sectors and
geographies with the most change ahead.
In January 2024, we published our
net zero transition plan. It provides an overview of our approach
to net zero and the actions we are taking to help meet our
ambition. It sets out how we intend to use our strengths as an
organisation to help deliver a broader impact on decarbonisation,
how we are working to embed net zero across key areas of our
organisation, and the principles that we aim to use to guide the
implementation of our approach.
Our
net zero strengths
We aim to rebalance our capital
deployment towards achieving net zero over the coming decades. We
believe we can do this best by promoting change in three key areas
that play to our strengths as an organisation: transitioning
industry; catalysing the new economy; and decarbonising trade and
supply chains.
Our
implementation plan
We are working to embed net zero
across our organisation. This includes embedding net zero into: the
way that we support our customers, both through customer engagement
and the provision of financing solutions; the way that we operate
as an organisation, including risk management, policies, governance
and own operations; and how we partner externally in support of
systemic change. It also means focusing first on the sectors and
customers with the highest emissions and transition risks, and
evolving and expanding our efforts over time.
Our
net zero principles
In implementing our approach to net
zero, we aim to be guided by a set of principles which are aligned
with our core values: science-based, transparent and accountable;
integrating nature; and just and inclusive.
For further details of our approach to the transition, see
our Net Zero Transition Plan 2024 at
www.hsbc.com/who-we-are/our-climate-strategy/our-net-zero-transition-plan.
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Our
net zero strengths
Where we believe we can best promote
change
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Our
implementation plan
Embedding net zero into how we
engage, operate and collaborate
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Supporting
our
customers
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Embedding net zero
into
the way we
operate
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Partnering
for
systemic
change
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Understanding our climate
reporting
The availability of high-quality
climate-related data, transparent reporting standards and
consistent methodology will play a vital role in helping deliver
the economic transformation required to limit global warming to
1.5°C at the speed and scale that is needed. We understand that our
existing data, systems, controls and processes require significant
enhancements to drive effective change, but we recognise the
necessity to balance this with providing early transparency on
climate disclosures.
Our
stakeholder dependency
Critical to our approach is a
recognition that as a bank we cannot do this alone. Our ability to
transition relies on decarbonisation in the real economy - both the
supply and demand side - happening at the necessary pace. Our
customers and the industries and markets we serve will need to
transition effectively, supported by strong government policies and
regulation, and substantially scaled investment. Engagement and
collaboration are therefore key to how we respond.
We acknowledge that to achieve our
climate ambition we need to be transparent about the opportunities,
challenges, related risks we face and progress we make. Our
reporting must evolve to keep pace with market developments, and we
will aim to work through challenges and seek to improve consistency
across different markets. Standard setters and regulators will play
a critical role. Some of the limitations and challenges that our
organisation, and the wider industry, currently face with regard to
climate reporting are highlighted on pages 47 to 48.
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Explaining scope 1, 2 and 3
emissions
To measure and manage our greenhouse
gas emissions, we follow the Greenhouse Gas Protocol global
framework, which identifies three scopes of emissions. Scope 1
represents the direct emissions we create. Scope 2 represents the
indirect emissions resulting from the use of electricity and energy
to run a business. Scope 3 represents indirect emissions attributed
to upstream and downstream activities. Our upstream activities
include business travel and emissions from our supply chain
including transport, distribution and waste. Our downstream
activities include those related to investments and including
financed emissions.
Under the protocol, scope 3
emissions are also broken down into 15 categories, of which we
provide reporting emissions data for three related to upstream
activities. These are: purchased goods and services (category 1);
capital goods (category 2); and business travel (category 6). We
also report data on downstream activities for financed emissions
(category 15).
> For further breakdown of our
scope 1, 2 and 3 emissions, see our ESG Data Pack at
www.hsbc.com/esg.
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1
Our analysis of financed emissions comprises 'on-balance sheet
financed emissions' and 'facilitated emissions'.
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Accelerating investment in Baltic
offshore wind energy
Polish multi-energy company Orlen
Group and Canadian power producer Northland Power have set up a
joint venture to build the Baltic Power project - the first
offshore wind farm in Polish waters of the Baltic Sea.
In September 2023, we played a key
role in supporting the construction and operation of 76 offshore
turbines when we acted as a mandated lead arranger for a $3.8bn
(€4.4bn) credit facility. We helped coordinate a syndicate of 25
Polish and international financial institutions to finance the
project.
With a target capacity of almost 1.2
gigawatts, the wind farm is expected to represent a significant
step in reducing Poland's reliance on fossil fuels and generate
enough clean electricity to power the equivalent of more than 1.5
million homes annually.
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Understanding our climate reporting
continued
Keeping up-to-date with real economy
progress
Net zero-aligned scenarios are
dynamic by nature; they are typically updated every few years to
incorporate significant shifts that have occurred in the real
economy. Key drivers of this include changes in the economic
environment, new data on technology deployment across sectors and
geographies, new policies, and increased investment in clean energy
and/or in fossil fuels.
The reference scenario we have
selected to date for our published 2030 targets, for on-balance
sheet and facilitated emissions, is the International Energy
Agency's ('IEA') NZE 2021 scenario, which is 1.5°C-aligned with
limited overshoot. In September 2023, the IEA's NZE 2023 scenario
was published as an update to reflect developments since 2021. As
outlined in our net zero transition plan, going forwards we intend
to review each updated set of 1.5°C-aligned scenarios to further
develop and enhance our understanding of the latest outlooks for
evolving pathways to achieve net zero by 2050. This will help us to
consider whether, how and when to iterate and update our approach
to scenario selection and target setting, portfolio alignment, and
policies to keep pace with the latest science and real-world
developments. We anticipate standard setter and industry guidance
on the treatment of updated scenarios in target setting to
emerge.
We recognise that the so-called
'hard-to-abate' sectors, such as cement, iron, steel and aluminium,
and aviation have a large dependence on nascent technologies and
the presence (or not) of enabling policies and regulations. We may
consider tracking progress relative to 1.5°C-aligned ambition
ranges for these sectors in the future, which could include
industry-specific scenarios alongside the IEA NZE
scenario.
Critical dependencies
Progress in the real economy towards
net zero will likely be non-linear and will depend
heavily on external factors
including the policy and regulatory landscape, the speed of
technological innovation, major economic shifts and geopolitical
events. There is also a risk of government or customer net zero
pledges or transition plans not turning into the necessary
emissions reductions in the coming decade, or in the case of
hard-to abate sectors, being pared back if technologies do not
scale in time. In addition, climate science, the quality of data,
and the scenarios upon which we have based our approach will
change. We recognise that while we have limited control of these
external dependencies, we can be clear on where we intend to focus
our efforts to help drive meaningful change, and that we expect to
iterate and mature our approach over time.
Our
internal and external data challenges
Our climate ambition requires us to
continue to enhance our capabilities including governance,
processes, systems and controls. In addition, there is a heightened
need for subject matter experts for climate-related topics as well
as upskilling of key colleague groups who are supporting customers
through their net zero transition. We also need new sources of
data, some of which may be difficult to assure using traditional
verification techniques. This challenge, coupled with diverse
external data sources and structures, further complicates data
consolidation. Our internal data on customer groups used to source
financial exposure and emissions data is based on credit and
relationship management attributes, and is not always aligned to
the data needed to analyse emissions across sector value chains. As
a consequence, this can result in an inconsistent basis in our
financed emissions calculations.
We continue to invest in our climate
resources and skills. Our activities are underpinned by efforts to
develop our data and analytics capabilities and to help ensure that
we have the appropriate processes, systems, controls and governance
in place to support our transition.
We continue to increase automation
of our processes, with a particular focus on developing our ESG
data capabilities to help address data gaps and improve
consistency. This includes sourcing more reliable data from
external providers. We are also developing our processes, systems,
controls and governance to meet the demands of future ESG
reporting. Certain aspects of our reporting rely on manual sourcing
and categorisation of data that is not always aligned with how our
businesses are managed. We also have a dependency on emissions data
from our clients. Given the manual nature of the process, enhanced
verification and assurance procedures are performed on a sample
basis over this reporting, including the first and second line of
defence. Our climate models undergo independent review by an
internal model review group, and we obtain limited assurance on our
financed emissions and sustainable finance disclosures from
external parties, including our external auditors.
Policy implementation
We
continue to review policy implementation as we apply our policies
in practice, and our operationalisation of such policies continues
to be enhanced. We take a risk-based
approach when identifying transactions and clients to which our
energy and thermal coal phase-out policies apply, and when
reporting on relevant exposures, adopting approaches proportionate
to risk and materiality. This helps to focus our efforts on areas
where we believe we can help drive meaningful change, while taking
into account experience from policy implementation over
time.
An
evolving approach to embedding net zero
We acknowledge that our assessment
of client transition plans - which to date has focused on clients
in scope of our thermal coal phase-out and energy policies - is at
an early stage with initial learnings on methodology and client
engagement. We are also at the early stages of embedding transition
plans alongside financed emissions into transaction and portfolio
level business and risk processes. Our net zero transition plan
provides further details of work underway and planned.
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Limited alignment on sustainable
finance taxonomies
Sustainable finance metrics,
taxonomies and best practices lack global consistency. As standards
develop over time and as the regulatory guidance around them
evolves across jurisdictions, our methodologies, disclosures and
targets may need to evolve. This could lead to differences in
year-on-year reporting and restatements.
We continue to engage with standard
setters in different regions to support the development of
transparent and consistent taxonomies to best incentivise
science-based decarbonisation, particularly in high transition risk
sectors. We aim to align to enhanced industry standards as they are
further developed, and increase transparency across the different
types of green and sustainable finance and investment categories
going forward.
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Understanding our climate reporting
continued
Financed emissions reporting challenges
The methodologies and data used to
assess financed emissions and set targets continue to evolve
alongside changes to industry guidance, market practice and
regulation. We plan to refine our analysis using appropriate data
sources and current methodologies available for the sectors we
analyse. We have developed an internal recalculation policy (see
page 56) to define the circumstances under
which a recalculating of financed emissions is necessary to help
support the consistency, comparability and relevance of our
reported emissions data over time.
We have now set combined on-balance
sheet financed emissions and facilitated emissions targets for two
emissions-intensive sectors: oil and gas, and power and utilities,
and report the combined progress for both sectors. We continue to
report on-balance sheet financed emissions and targets for cement,
iron, steel and aluminium, aviation, automotive and in 2023 we
added thermal coal mining financed emissions.
Emissions related to our insurance
business are partially captured within the disclosures of HSBC
Asset Management, which manages the vast majority of our insurance
assets. The Partnership for Carbon Accounting Financials ('PCAF')
standard for insurance associated emissions (part C) is not
applicable to our insurance business as HSBC Insurance focuses on
the manufacturing of life insurance products.
In November 2023, our asset
management business updated its 2022 thermal coal phase-out policy
and released a new energy policy. It continues to focus on its
portfolios' scope 1 and scope 2 decarbonisation target for 2030
with the aim of aligning with net zero emissions by 2050 or sooner.
The commitment covers listed equity and corporate fixed income
where data is most reliable and methodologies are most
mature.
In January 2023, we withdrew our
commitment to the Science Based Targets initiative ('SBTi'), which
we had made in 2016, because we determined that it would not be
feasible for us to meet SBTi's requirement to submit a complete set
of sector targets for validation by its deadline. We continue to
engage with SBTi on guidance for financial institutions and we
participated in SBTi's consultation process on its revised
standards during the year.
Disclosure revisions
We are committed to timely and
transparent reporting. However, we recognise that challenges on
data sourcing, as well as the evolution of our processes and
industry standards, may result in us having to restate certain
disclosures. In 2023, there has been an impact on certain climate
disclosures, as follows:
- Financed
emissions: we improved our methodology for calculating financed
emissions using more granular product identification to isolate
exposure in scope, more consistent emission factors for estimates,
and a revised aggregation method for emission intensity. Previously
reported on-balance sheet numbers included non-lending exposures
for market products in error. The more granular product
identification will help ensure these are not included in
future.
- Financed
emissions: to reflect these enhancements we have set out the
recalculated metrics for the oil and gas, and power and utilities
sectors in the financed emissions section. The oil and gas baseline for on-balance sheet financed
emissions is now 28.4 million tonnes of carbon dioxide equivalent
('Mt CO2e') for 2019 versus 33.0 Mt CO2e reported in the
Annual Report and Accounts
2022. The power
and utilities baseline for on-balance sheet financed emissions is
now 537.5 tonnes of carbon dioxide equivalent per gigawatt hour
('tCO2e/GWh') for 2019 versus 589.9 tCO2e/GWh reported in the
Annual Report and Accounts
2022. For other
sectors, changes were not material enough to warrant a
recalculation.
- Thermal
coal exposures: we have now revised the basis of
preparation for our thermal coal exposures. Aligned with our
thermal coal phase-out policy, we applied a risk-based approach to
identify clients and report on relevant exposures. Our
thermal coal financing drawn balance exposure was approximately $1bn† as at 31 December 2020.
We continue to work on our 2021 and 2022 numbers
based on our revised basis of preparation and expect to report on
these in future disclosures.
- Thermal coal power financed emissions: we have discontinued
separate tracking and reporting of thermal coal power financed
emissions. A review of the counterparties included within the
on-balance sheet financed emissions calculation showed that the
majority of thermal coal power entities in scope are included in
other financed emission sector targets. We previously set separate
targets to reduce on-balance sheet financed emissions for thermal
coal power and thermal coal mining aligned to our thermal coal
phase-out policy. We plan to maintain a financed emissions target
for thermal coal mining only, and have set an absolute on-balance
sheet reduction target for 2030 from a 2020 baseline. We used 2020
as a baseline to align with those applied to our drawn balance
exposure targets. These targets reflect the percentage reduction
that the IEA indicates in its net zero emissions scenario for
global emissions to 2030.
- Shipping:
following a reduction in our exposure to the shipping sector after
the strategic sale of part of our European shipping portfolio in
2023, and work undertaken to assess the materiality of our
remaining portfolio from a financed emissions perspective, we have
concluded that the remaining exposure as of year-end 2023 is not
material enough to warrant setting a stand-alone target. This
aligns with Net-Zero Banking Alliance ('NZBA') guidelines on sector
inclusion for target setting.
Continuing to evolve our climate
disclosures
We understand the need to provide
early transparency on climate disclosures but we must balance this
with the recognition that our existing data and reporting processes
require significant enhancements. Due to
ongoing data availability and quality challenges, we continue to
assess our financed emissions for our real estate and agriculture
sectors.
We are engaging with standard
setters to support the development of transparent and consistent
climate-related industry standards in areas such as product
labelling, sustainability disclosures, sustainable finance taxonomy
and emissions accounting. Voluntary industry initiatives can also
help shape action and collaboration, and often form the basis of
future climate policy and regulation. For example, we supported the
TCFD, which is now referenced in climate disclosure rules around
the world.
In 2024, we will continue to review
our approach to disclosures, and enhance as appropriate.
|
|
|
For details of assurance over our ESG data, see page
43.
For details of our approach to calculating financed emissions
and the relevant data and methodology limitations, see page
55.
For details of our sustainable finance and investment
ambition, see page 49.
For details of our approach to thermal coal financing
exposures, see page 67.
For further details of our asset management policies,
see page 67.
†
Data is subject to independent limited assurance by PwC in
accordance with ISAE 3000/ ISAE 3410. For further details, see our
Financed Emissions and Thermal Coal Exposures Methodology and PWC's
limited assurance report, which are available at
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
Sustainable finance and
investment
We recognise that we have an
important role to play in supporting the transition to a net zero
global economy. As a global organisation with a presence in the
regions and sectors where most significant change is needed, we are
well placed to help transition industry and catalyse the new
economy to reach net zero.
Progress on our sustainable finance and investment
ambition
We aim to help our customers
transition to net zero and a sustainable future by providing and
facilitating between $750bn and $1tn of sustainable finance and
investment by 2030. Our sustainable
finance and investment ambition aims to help promote green,
sustainable and socially-focused business and sustainable
investment products and solutions.
Since 1 January 2020, we have
provided and facilitated $267.8bn of
sustainable finance and $26.6bn of ESG and
sustainable investing, as defined in our Sustainable Finance and Investment Data
Dictionary 2023. This included 38% where the use of proceeds
were dedicated to green financing, 12% to social financing, and 15%
to other sustainable financing. It also included 26% of
sustainability-linked financing and 9% of net new investment flows
managed and distributed on behalf of investors. In 2023, our
underwriting of green, social, sustainability and
sustainability-linked bonds for clients decreased over the year,
measured on a proportional share basis, in line with the wider bond
market environment, although it remained at 15% of our total bond
underwriting. On-balance sheet sustainable lending transactions
increased by 7% compared with 2022. In 2023, transactions totalling
$0.7bn were identified as no longer fulfilling our eligibility
criteria. These were declassified and removed from the cumulative
progress total, and reported as a negative entry in
2023.
Continued progress towards achieving
our sustainable finance and investment ambition is dependent on
market demand for the products and services set out in our
Sustainable Finance and
Investment Data Dictionary 2023.
Sustainable finance and investment
summary1
|
2023
($bn)
|
2022 ($bn)
|
2021 ($bn)
|
2020 ($bn)
|
Cumulative progress since
2020
($bn)
|
Balance sheet-related transactions
provided
|
42.7
|
42.2
|
26.0
|
10.4
|
121.3
|
Capital markets/advisory
(facilitated)
|
33.3
|
34.5
|
48.7
|
30.0
|
146.5
|
ESG and sustainable investing (net
new flows)
|
7.7
|
7.5
|
7.7
|
3.7
|
26.6
|
Total contribution2
|
83.7
|
84.2
|
82.4
|
44.1
|
294.4
|
Sustainable finance and investment classification by
theme
|
|
|
|
Green use of
proceeds3,4
|
37.1
|
29.0
|
27.1
|
18.9
|
112.1
|
Social use of
proceeds3
|
8.4
|
6.7
|
11.3
|
9.7
|
36.1
|
Other sustainable use of
proceeds3,5
|
10.7
|
12.6
|
11.7
|
8.3
|
43.3
|
Sustainability-linked6
|
19.8
|
28.4
|
24.6
|
3.5
|
76.3
|
ESG and sustainable
investing7
|
7.7
|
7.5
|
7.7
|
3.7
|
26.6
|
Total contribution2,8
|
83.7
|
84.2
|
82.4
|
44.1
|
294.4
|
1
The 2023 data in this table has been prepared in accordance with
our Sustainable Finance and Investment Data Dictionary 2023, which
includes green, social and sustainability activities. The amounts
provided and facilitated include: the limits agreed for balance
sheet-related transactions provided, the proportional share of
facilitated capital markets/advisory activities and the net new
flows of sustainable investments within assets under
management.
2
The $294.4bn cumulative progress since 2020 is subject to PwC's
limited assurance in accordance with International Standard on
Assurance Engagements 3000 (Revised) 'Assurance Engagements other
than Audits or Reviews of Historical Financial Information'. For
our Sustainable Finance and Investment Data Dictionary 2023 and
PwC's limited assurance report, see
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
3
For green, social and other sustainable use of proceeds, the
capital markets products are aligned to the International Capital
Markets Association's ('ICMA') Green Bond Principles, Social Bond
Principles or Sustainability Bond Guidelines or the Climate Bonds
Initiative as applicable. The lending labelled products are aligned
to the Green Loan Principles ('GLP') or Social Loan Principles of
the Loan Market Association ('LMA'), Asia-Pacific Loan Market
Association ('APLMA') and the Loan Syndications and Trading
Association ('LSTA') as applicable; or for our sustainable trade
instruments, are aligned to HSBC's internal sustainable trade
instrument principles which are based on the GLP and reference the
UN SDGs. Also included are facilities where HSBC identifies that
the use of proceeds would meet eligibility criteria as defined and
approved by appropriate governance committees but these are not
labelled or marketed as green or social.
4
Included within the total cumulative contribution towards our
ambition are transactions to customers within the six high
transition risk sectors (i.e. automotive, chemicals, construction
and building materials, metal and mining, oil and gas, and power
and utilities) as described on page 223.
Of which approximately $37bn is defined as green use of proceeds in
line with the Sustainable Finance and Investment Data Dictionary
2023.
5
Sustainable use of proceeds can be used for green, social or a
combination of green and social purposes.
6
Our sustainability-linked labelled products are aligned to either
the ICMA Sustainability-Linked Bond Principles or the
Sustainability-Linked Loan Principles of the LMA, APLMA and the
LSTA as applicable. The coupon or interest rate is dependent on
whether the borrower achieves predefined sustainability performance
targets. The funds can be used for general
purposes.
7
Net new flows of both HSBC-owned (Asset Management) sustainable
investment funds and Wealth and Global Private Banking investments
assessed against the Sustainable Finance and Investment Data
Dictionary 2023.
8
Additional detailed information on our sustainable finance and
investment progress can be found in the ESG Data Pack at
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
Sustainable finance and investment
continued
Sustainable finance and investment
definitions
Our data dictionary defining our
sustainable finance and investment continues to evolve, and is
reviewed annually to take into account the evolving standards,
taxonomies and practices we deem appropriate. This involves
reviewing and strengthening our product definitions, where
appropriate, adding and deleting qualifying products, making
enhancements to our internal standards, and developing our
reporting and governance.
Industry and regulatory guidance on
definitions for sustainable finance continue to evolve. In 2023,
the Glasgow Financial Alliance for Net Zero ('GFANZ'), NZBA and the
UK government released work-in-progress definitions of transition
finance. We will continue to monitor these and other developments
in sustainable finance definitions.
Our progress will be published each
year, and we will seek to continue for it to be independently
assured.
Mobilising capital to support our customers
In 2023, we continued to focus on
providing our customers with products, services and initiatives to
help enable emissions reduction in the real economy.
For example, we increased our funding from $5bn to $9bn for our sustainable
finance scheme that supports businesses of all sizes in China's
Greater Bay Area to transition to low-carbon operations. The
scheme, launched in 2022, provides successful loan applicants
access to a range of additional services including training,
subsidised third-party assessments and assistance from a team with
sustainable financing expertise. For our Wealth and Personal
Banking customers, we launched green mortgages in Mexico, electric
vehicle loans in India and a referral service to our electric
vehicle leasing partner in the UK.
In 2023, we introduced an internal
briefing series called Net Zero in Practice, which covers new
technologies relevant to the net zero transition, drawing on
expertise from across the organisation and highlighting financing
opportunities and case studies.
We continue to be a participant in
the Just Energy Transition Partnerships ('JETPs') in Indonesia and
Vietnam, and in the Nexus for Water, Food and Energy in Egypt.
These initiatives aim to play a catalytic role in mobilising
finance to accelerate the energy transition. For further details of
our involvement with the JETPs, see page 68.
In 2023, we won three awards at the
Environmental Finance Bond
Awards. We retained the Euromoney award for Best Bank for
Sustainable Finance in Asia for the sixth year in a row, and won
the global award for Best Bank for Public Sector Clients in
recognition of our innovation in sustainability and tokenised
public-sector bonds.
Our
sustainable finance and investment data
dictionary
We define sustainable finance and
investment as any form of financial service that integrates ESG
criteria into business or investment decisions. This includes
financing, investing and advisory activities that support the
achievement of UN Sustainable Development Goals ('SDGs'), including
but not limited to the aims of the Paris Agreement on climate
change.
Details of our revised definitions
of the contributing activities for sustainable finance and
investment and how we calculate the amounts we count are available
in our Sustainable Finance and
Investment Data Dictionary 2023.
For our ESG Data Pack and Sustainable Finance and Investment Data
Dictionary, see
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
|
|
|
|
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Developing sustainable food supply
chains in south-east Asia
Singapore-based Glife Technologies
has developed a digital business-to-business food-sourcing platform
that connects farmers from marginalised communities in south-east
Asia to the hospitality industry.
The distribution network, served by
an app, aims to improve the efficiency and sustainability of supply
chains by aggregating orders and sourcing in bulk direct from
farmers, in order to help control costs and reduce the risk of food
waste from damage or contamination.
In June 2023, we provided a working
capital loan and access to our cross-border network to help Glife
expand its platform into new markets, including Malaysia and
Indonesia. The loan also aims to help Glife finance social projects
seeking to improve food security and creating more sustainable food
systems. The loan was drawn from HSBC's New Economy fund, which is
dedicated to investing in high-growth, pre-profit new economy
businesses in Singapore.
|
Sustainable finance and investment
continued
Responsible and sustainable investment
We offer a broad suite of ESG
capabilities across asset management, global markets, wealth,
private banking and securities services, to help institutional and
individual investors to generate financial returns, manage risk and
pursue ESG-related opportunities.
Our Asset Management business is
committed to further developing our sustainable product range
across asset classes, as well as enhancing our existing product
suite for ESG and climate-related criteria where it is in the
investors' interests to do so. In 2023, we launched 10 funds within
our ESG and sustainable strategies, which adhere to, and are
classified within, our Sustainable Finance and Investment Data
Dictionary 2023.
HSBC Asset Management managed over
$684bn assets at the end of 2023, of which $73.3bn comprise assets
of funds and mandates invested in our ESG and sustainable
strategies.
Our ESG and sustainable investing
approach across different investment products can include but is
not limited to the UN SDGs, including climate. For the avoidance of
doubt, assets invested pursuant to, or considered to be in
alignment with, HSBC's ESG and sustainable investing approach do
not necessarily qualify as 'sustainable investments' as defined by
the EU Sustainable Finance Disclosures Regulation ('SFDR') or other
relevant regulations. Our ESG and sustainable investing approach is
an HSBC internal classification approach used to establish our own
ESG and sustainable investing criteria (recognising the
subjectivity inherent in such an approach and the variables
involved). It is also used to promote consistency across asset
classes and business lines where relevant, and should not be relied
on externally to assess the sustainability characteristics of any
given product. There is no single global standard definition of, or
measurement criteria for, ESG and sustainable investing or the
impact of ESG and sustainable investing products.
We seek to take an active
stewardship role to help drive positive change in the companies on
our priority list in which we invest on behalf of our customers.
The priority list, which is defined in our Global Stewardship Plan,
can be found at:
www.assetmanagement.hsbc.co.uk/en/institutional-investor/about-us/responsible-investing/-/media/files/attachments/uk/policies/stewardship-plan-uk.pdf.
HSBC Asset Management's fixed
income, equity and stewardship teams held over 2,000 meetings with
companies in its portfolios. This included engaging with companies
on the priority list across several thematic priorities, such as
climate change, human rights, public health, inclusive growth and
shared prosperity, biodiversity and nature, trusted technology and
data, and diversity, equity and inclusion.
For our private banking and wealth
customers, we expanded our investment offering with the launch of
eight ESG and sustainable investing mutual funds and
exchange-traded funds in 2023. We also enhanced our ESG and
sustainable investing structured products offering linked to
indices such as the MSCI World Islamic ESG Select 8% Risk Control
Index. Throughout 2023, we published regular ESG
and sustainability-related market insights and updates such as
#WhyESGMatters and Learning about ESG to help clients better
understand the implications for their
investments.
HSBC Life, our insurance business,
continues to expand the availability of ESG investment fund options
within its investment-linked products. In 2023, eight new ESG funds
were introduced across Hong Kong, France and Singapore with a range
of investment themes, including environmental, circular economy and
sustainable energy.
In June, under the United Nations
Environment Programme Finance Initiative ('UNEP FI') Principles for
Sustainable Insurance, HSBC Life co-led a team of insurance
organisations to publish an industry position paper focused on the
role and opportunity for life and health insurers to help build a
more inclusive and preventative healthcare model. This included
examples of good industry practice to: help insurers improve access
to healthcare; close the health protection gap; drive better health
outcomes across populations; and mitigate potential health risks
due to climate change and other environmental factors.
For further details of our asset management policies, see
page 67.
Helping customers to understand ESG
in their investments
We have launched new metrics to help
our Global Private Banking and Wealth customers understand the ESG
performance of their investments. In selected markets in 2023, we
also introduced a sustainability preference questionnaire to help
identify and understand our customers' sustainable investing
objectives and ambitions. By improving clarity on ESG performance,
which traditional financial metrics fail to capture, we aim to
provide customers with meaningful insights to enable them to make
informed investment decisions. Examples of these metrics, available
on digital platforms in selected markets, are:
- 'ESG
rating and score', which measures a company's resilience to
material long-term, industry ESG risks and opportunities, with data
provided by MSCI.
- 'Carbon
intensity', which measures a company's carbon emissions per million
of revenue, with data provided by S&P Trucost.
In addition, we have also introduced
'HSBC ESG and sustainable investing classifications', which help
customers to understand and identify ESG and sustainable investing
products in their investment portfolio according to HSBC's
definition.
|
|
|
Sustainable finance and investment
continued
Unlocking climate solutions and innovation
We recognise the need to find new
solutions and increase the pace of change for the world to achieve
the Paris Agreement goal of being net zero by 2050.
We are working with a range of
partners to accelerate investment in sustainable infrastructure,
natural resources and climate technology to help reduce emissions
and address climate change.
Sustainable infrastructure
Addressing climate change requires
the rapid development of a new generation of sustainable
infrastructure.
HSBC continues to support the
FAST-Infra Initiative, which we helped conceive, working with the
IFC, OECD, the World Bank's Global Infrastructure Facility and the
Climate Policy Initiative, under the auspices of the One Planet
Lab. In 2023, the initiative, which aims to mobilise large-scale
financing to develop sustainable infrastructure, invited pilot
photovoltaic and wind power projects around the world to apply for
the provisional FAST-Infra label. The label is awarded to projects
that meet specific sustainability criteria. HSBC is supporting the
introduction and widespread adoption of the labelling system as a
standard for sustainable infrastructure assets globally.
Label applicants
included a solar photovoltaic project submitted by Pentagreen
Capital, our sustainable infrastructure debt financing partnership
with Singapore-based investment firm Temasek. The project
sponsor was Citicore Solar Energy Corporation, a subsidiary of the
Philippines-focused renewable energy developer and operator
Citicore Renewable Energy Corporation. Pentagreen acted as lead
arranger of a $100m green loan facility and committed an initial
$30m to help fund Citicore's development of six solar power
projects capable of generating 490 megawatts of electricity for the
island of Luzon in the Philippines. The commitment marks
Pentagreen's first investment in the construction of ready-to-build
clean energy projects.
In 2023, the Multilateral Investment
Guarantee Agency of the World Bank Group issued HSBC Holdings a
guarantee of $1.8bn in regulatory capital relief on mandatory
reserves held by its subsidiary in Mexico. The benefits of the
capital relief are expected to be deployed to exclusively support
eligible climate finance projects in Mexico, including renewable
energy, energy efficiency, clean transportation and sustainable
agriculture.
The HSBC Alternatives business, part
of HSBC Asset Management, continued to develop its energy
transition infrastructure capabilities in Asia, targeting
investments in renewable energy generation, storage, grids,
charging and hydrogen infrastructure. To help support the
transition to green energy in North Asia, the energy transition
infrastructure strategy made its first investment in solar
photovoltaic power project developer Tekoma Energy.
Natural capital as an emerging asset class
Climate Asset Management, a joint
venture we launched with climate investment and advisory firm
Pollination in 2020, continues to create investment opportunities
for investors to help protect biodiversity and support the
transition to net zero.
It offers two investment strategies
that aim to build resilience across landscapes while generating
returns. Its nature-based carbon strategy targets nature
restoration and conservation projects in developing economies,
prioritising community benefits while generating high-quality
carbon credits. Its natural capital strategy invests in
agriculture, forestry and environmental assets and aims to deliver
impact at scale alongside long-term financial returns.
On behalf of these strategies in
2023, Climate Asset Management allocated more than $400m to
projects in Kenya, Uganda, Malawi, Spain, Australia and
Portugal.
Backing new technology and innovation
At the COP28 Summit in the UAE, HSBC
pledged its support for the Energy Transition Accelerator Financing
Platform, which aims to scale up the development of renewable
energy projects in developing countries. Established in 2021 with
initial support from the Abu Dhabi Fund for Development and the
International Renewable Energy Agency, the platform brings together
public and private institutions. HSBC signed alongside the European
Bank for Reconstruction and Development, the International Finance
Corporation and the Multilateral
Investment Guarantee Agency. We will work
with platform partners to expand the pipeline of investable
projects in core HSBC markets, including in Asia and the Middle
East, bringing financing solutions that support the transition to
net zero.
We also became a founding member of
the Global Climate Finance Centre, a newly launched UAE-based think
tank created to connect public and private finance to help
accelerate the transition to net zero.
HSBC Alternatives made direct
investments in assets that help to promote the transition to a net
zero climate. The venture capital strategy invests across four
themes: power transformation, transport electrification, supply
chain sustainability and climate risk mitigation. The strategy
raised additional funds from institutional and private wealth
clients over the course of 2023. As of 31 December 2023, the
strategy had deployed capital into eight start-up companies. These
included US-based Electric Era, which provides electric vehicle
fast-charging technology, and Israel-based SeeTree, which has
developed a software platform that tracks the health and
productivity of trees.
|
We announced our ambition to become
a net zero bank in October 2020, including an aim to align our
financed emissions to net zero by 2050 or sooner. We have published
initial financed emissions targets for 2030, and plan to review
them in five-year increments thereafter.
Our analysis of financed emissions
comprises 'on-balance sheet financed emissions' and 'facilitated
emissions', which we distinguish where
necessary in our reporting. Our on-balance sheet
financed emissions include emissions related to on-balance sheet
lending, such as project finance and direct lending. Our
facilitated emissions include emissions related to financing we
help clients to raise through capital markets activities.
Our analysis covers financing from Global Banking and Markets, and
Commercial Banking.
Financed emissions link the
financing we provide to our customers and their activities in the
real economy, and provide an indication of the associated
greenhouse gas
emissions. They form part of our
scope 3 emissions, which include emissions associated with the use
of a company's products and services.
In 2021, we started measuring
financed emissions for oil and gas, and power and utilities.
Following the December 2023 release of the PCAF Global GHG
Accounting Standard for capital markets, we now include facilitated
emissions for these sectors, in recognition of our role as service
provider when customers issue debt and equity to investors. For
target setting we now track the combined progress for on-balance
sheet financed and facilitated emissions.
In 2022, we disclosed the on-balance
sheet financed emissions targets for the following additional
sectors: cement; iron, steel and aluminium; aviation; and
automotive. We also set a target, and now measure, on-balance sheet
financed emissions for the thermal coal mining sector. As part of
our financial reporting, we present the
progress
for these
sectors against the financed emissions baselines that we now
measure ourselves against.
Following a reduction in our
exposure to the shipping sector after the strategic sale of part of
our European shipping portfolio in 2023, and work undertaken to
assess the materiality of our remaining portfolio from a financed
emissions perspective, we have concluded that the remaining
exposure as of year-end 2023 is not material enough to warrant
setting a stand-alone target. This aligns with NZBA guidelines on
sector inclusion for target setting.
We have announced a number of
planned business disposals in recent years, and we will continue to
consider how these may impact future disclosures, including
recalculations.
For all sectors other than oil and
gas and thermal coal mining, we have set emissions intensity
targets. These targets are linked to real world production and help
us to deploy capital towards decarbonisation solutions.
Our approach to financed
emissions
In our approach to assessing our
financed emissions, our key methodological decisions were shaped in
line with industry practices and standards. We recognise these are
still developing.
Coverage of our analysis
For each sector, our analysis
focuses on the parts of the value chain where we believe the
majority of emissions are produced to help reduce double counting
of emissions. By estimating emissions and setting targets for
customers that directly account for, or indirectly influence, the
majority of emissions in each industry, we can focus our
engagement and resources where we
believe the potential for change is highest. For each sector, our
reported emissions now typically include all the major greenhouse
gases, including carbon dioxide, methane and nitrous oxide, among
others. These are reported as tonnes of CO2 equivalent, in line
with NZBA guidelines.
To calculate annual on-balance sheet
financed emissions, we use drawn balances as at 31 December in the
year of analysis related to wholesale credit and lending, which
include business loans and project finance as the value of finance
provided to
customers. We excluded products that
were short term by design, and typically less than 12 months in
duration, consistent with guidance from the PCAF, to reduce
volatility. For facilitated emissions we considered all capital
market transactions in scope for the year of analysis. These
included debt and equity capital markets, and syndicated
loans.
For further details
of our financed emissions methodology, exclusions, and limitations,
see our Financed Emissions and Thermal Coal Exposures Methodology
at
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
The chart below shows the scope of
our financed emissions analysis of the seven sectors, including
upstream, midstream and downstream activities within each sector.
The allocation of companies to different parts of the value chain
is highly dependent on expert judgement and data available on
company revenue streams. As data quality improves, this will be
further refined.
|
Sector
|
Scope of emissions
|
Value chain in scope
|
|
|
Coverage of
greenhouse
gases
('GHGs')
|
Oil and gas
|
1, 2 and 3
|
|
|
|
|
All
GHGs
|
Power and utilities
|
1 and 2
|
|
|
|
All
GHGs
|
Cement
|
1 and 2
|
|
|
|
All
GHGs
|
Iron, steel and aluminium
|
1 and 2
|
|
|
|
All
GHGs
|
Aviation
|
1 for airlines
3 for aircraft lessors
|
|
|
|
All
GHGs
|
Automotive
|
1, 2 and 3
|
|
|
|
All
GHGs
|
Thermal coal mining
|
1, 2 and 3
|
|
|
|
All
GHGs
|
Key:
|
|
|
|
|
|
|
Financed emissions
continued
Setting our targets
Our target-setting approach to date,
for on-balance sheet financed emissions and facilitated emissions,
has been to utilise a single net zero reference scenario (IEA NZE
2021) to underpin both energy supply-related sectors (oil and gas,
power and utilities, and thermal coal mining) and our published
targets for demand-side sectors in transport and heavy
industry.
The impact of our capital markets
activities is now reflected in our combined financed emissions
targets for the oil and gas, and power and utilities sectors. Our
facilitated emissions, included in our combined metrics, are
weighted at 33%, in accordance with the PCAF standard. This
approach dampens volatility, apportions responsibility between
underwriters and asset owners, and allows for flexibility in
deploying on and off-balance sheet financing in line with clients'
needs. To further reduce the inherent volatility in facilitated
emissions, we apply a three-year moving average across transactions
for our target metric, building up from 2019 data. This means that
transactions facilitated in 2028 and 2029 will still have an impact
on the 2030 progress number and will need to be taken into
consideration as we manage progress towards our target. We aim to
achieve our target in 2030 notwithstanding the application of a
three-year average.
Our approach for financed emissions
accounting does not rely on purchasing offsets to achieve any
financed emissions targets we set.
An
evolving approach
We believe methodologies for
calculating financed emissions and setting targets should be
transparent and comparable, and should provide science-based
insights that focus engagement efforts, inform capital allocation
and support the development of solutions that are both timely and
impactful. We continue to engage with regulators, standard setters
and industry bodies to help shape our approach to measuring
financed emissions and managing portfolio alignment to net zero. We
also work with data providers and our clients to help us gather
data from the real economy to improve our analysis.
Scenarios used in our analysis are
modelled on assumptions of the available carbon budget and actions
that need to be taken to limit the long-term increase in average
global temperatures to 1.5°C with limited overshoot. We expect that
the scenarios we use will be updated periodically. We plan to
refine our own analysis of financed emissions as industry guidance
on scenarios, data and methodologies more broadly evolve in the
years ahead.
Agriculture
For the agriculture sector, due to
ongoing data availability and quality challenges, and lack of
developed methodologies, we are not in a position to report our
financed emissions or set a target at this time. We aim to build
data availability and continue to work with partners and industry
bodies to develop data and methodologies across a wider section of
the agriculture value chain - such as farm-related and downstream
emissions, including from the food and beverage sector - while
assessing the make-up of our portfolio.
Residential real estate
For residential real estate, where
our customers are consumers not corporates, our approach needs to
consider financial inclusivity, and our ability to provide
customers access to suitable mortgages in addition to
decarbonisation aims. We expect to measure and report our
residential real estate financed emissions in future disclosures.
We continue to consider our approach to setting an appropriate
target to measure our contribution to helping the sector
transition.
Commercial real estate
For commercial real estate, we
continue to work towards outlining a baseline and a 2030 financed
emissions ambition or ambition range, starting with our major
markets and where sufficient data is available to track
decarbonisation progress. We expect to review our approach and
coverage periodically in line with evolving data, methodologies,
scenarios and real-world progress. Methodologies for embedded
carbon need to be developed given the materiality of financing new
property development within our portfolio, from a financed
emissions perspective.
|
Investing in battery health and
monitoring solutions
The global push towards
electrification is accelerating the demand for systems powered by
safe, reliable and sustainable batteries.
In August 2023, HSBC Asset
Management, as part of its climate tech venture capital strategy,
helped a Germany-based analytics software start-up secure $7.8m
(€7.2m) of investment in its battery monitoring platform, with HSBC
Asset Management's fund providing $4.1m (€3.8m).
ACCURE Battery Intelligence uses AI,
field data and modelling to forecast and manage the health and
performance of batteries, and predict failures, fires and other
incidents. With their software already supporting 3.5
gigawatt-hours of storage, the fundraising will help expand and
develop the platform across energy, electric vehicle, transit,
marine, insurance and other industries worldwide.
|
Financed emissions
continued
Data and methodology
limitations
Our financed emissions estimates and
methodological choices are shaped by the availability of data for
the sectors we analyse.
- We are
members of the PCAF, which defines and develops greenhouse gas
accounting standards for financial institutions. Its Global GHG
Accounting and Reporting Standards for Financed Emissions and for
Facilitated Emissions provide detailed methodological guidance to
measure and disclose financed and facilitated emissions.
- We have
found that data quality scores vary across the different sectors
and years of our analysis, although not significantly. While we
expect our data quality scores to improve over time, as companies
continue to expand their disclosures to meet growing regulatory and
stakeholder expectations, there may be fluctuations within sectors
year on year, and/or differences in the data quality scores between
sectors due to changes in data availability.
- The
majority of our clients do not yet report the full scope of
greenhouse gas emissions included in our analysis, in particular
scope 3 emissions. In the absence of client-reported emissions, we
estimated emissions using proxies based on company production and
revenue figures. Although we sought to minimise the use of
non-company-specific data, we applied industry averages in our
analysis where company-specific data was unavailable through our
vendor datasets. As data improves, estimates will be replaced with
reported figures.
- Third-party datasets that feed into our analysis may have up
to a two-year lag in reported emissions figures, and we are working
with data providers to help reduce this. Mapping external datasets
to our internal client entities is challenging due to complex
company ownership structures.
-
The methodology and data used
to assess financed emissions and set targets are new and evolving,
and we expect industry guidance, market practice, and regulations
to continue to change. We plan to refine our analysis using
appropriate data sources and current methodologies available for
the sectors we analyse.
- We remain
conscious that the attribution factor used in the financed
emissions calculation is sensitive to changes in drawn amounts or
market fluctuations, and we plan to be transparent around drivers
for change to portfolio financed emissions where
possible.
- To
calculate sector-level baselines and annual updates, our
portfolio-level emissions intensity was previously weighted by the
ratio of our financing in relation to the value of the financed
company. We believe this introduced volatility. We have now
calculated sector level emissions intensity metrics using a
portfolio-weighted approach. Due to data limitations, we are unable
to obtain production data for all of our clients. We therefore
calculate an emissions intensity figure using the 75th percentile
to meet this data gap.
-
The classification of our
clients into sectors is performed with inputs from subject matter
experts, and will also continue to evolve with improvements to data
and our sector classification approach. Our internal data on
customer groups used to source financial exposure and emissions
data is based on credit and relationship management attributes and
is not always aligned to the data needed to analyse emissions
across sector value chains. As a consequence, this can result in an
inconsistent basis in our financed emissions calculations. As the
sub-sector, and therefore the value chain classification is based
on judgement, this may be revised as better data becomes available.
Emissions are calculated at a counterparty group level and each
client is mapped to a single sector. Companies with multiple
activities such as conglomerates, with near to equal business
activity split across multiple sectors, are excluded as these can
have different activities covered by multiple sector targets. Once
we define a methodology for conglomerates these may be covered
according to their activity split.
- The
operating environment for climate analysis and portfolio alignment
is maturing. We continue to work to improve our data management
processes, and are implementing steering mechanisms to align our
provision of finance with the goals and timelines of the Paris
Agreement.
For further details of our financed emissions methodology,
see our Financed Emissions and Thermal Coal Exposures Methodology
at
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
|
|
Tackling operational emissions in
industry
We are supporting one of the largest
producers of textile raw materials in Indonesia to reduce the
greenhouse gas emissions in its operations. PT. Indo-Rama
Synthetics Tbk, which specialises in the integrated production of
spun yarn and polyester, wanted to expand its operations and meet
its customer demand in a sustainable way.
To help PT. Indo-Rama Synthetics Tbk
invest in reducing energy consumption, we provided a $20m green
loan in September 2023 so that it can install energy efficient
machinery and technology in the expansion of its yarn spinning
factory.
|
Financed emissions
continued
Our approach to financed emissions
recalculations
The PCAF recommends that financial
institutions should, in line with the Greenhouse Gas Protocol
Corporate Value Chain (Scope 3) Accounting and Reporting Standard
requirement, establish a recalculation policy. To adhere to this
recommendation, we have defined the circumstances under which we
consider a recalculation of baseline and/or progress against
financed emissions target metrics is necessary to help ensure the
consistency, comparability and relevance of the reported greenhouse
gas emissions data
over time. Our recalculation policy
covers revisions of metrics linked to the targets due to changes in
financed emissions accounting, such as changes to methodology,
errors, and improvements to data. We expect our recalculation
policy to evolve with further industry guidance.
The table below outlines the action
we take when key areas of change, individually or in aggregate,
breach our defined significance thresholds for the baseline year
metric linked to the target. Enhancements to internal or external
data, such as changes to the classification of the population to a
different business activity type or more, or improved quality data
reported by clients, would not constitute a change to the financed
emissions estimation methodology or an error.
Key
reasons for change
|
What we expect to disclose
|
Changes to the financed emissions
methodology such as changes to design choices
|
- The
reasons why applying the new metrics provides reliable and more
relevant information
- The
actions being taken to remediate same or similar errors in the
future
- The
nature of the change(s) and errors in financed emissions accounting
impacting the baseline progress metric and all prior year progress
metrics disclosed as far as is practicable
- The
aggregate amount of any adjustments impacting the baseline progress
metric and all prior year progress metrics disclosed as far as is
practicable
- The
change in financed emissions accounting baseline progress metric
and all prior year progress metrics disclosed as far as is
practicable
|
Errors such as a failure to carry
out our methodology or errors in internal financial data
|
In 2023, we improved our methodology
for calculating financed emissions using more granular product
identification to isolate exposure in scope, more consistent
emission factors for estimates, and a revised aggregation method
for emissions intensity. Previously some reported on-balance sheet
numbers included non-lending exposures for market products in
error. The more granular product identification will help ensure
these are not included in future.
To reflect these enhancements we
have set out the recalculated metrics for the oil and gas, and
power and utilities sectors in the table below. For other sectors,
changes were not material enough to warrant a
recalculation.
The oil and gas baseline for
on-balance sheet financed emissions is now 28.4 million tonnes of
carbon dioxide equivalent ('Mt CO2e') for 2019 versus 33.0 Mt CO2e
reported in the Annual Report and
Accounts 2022. Of this change, 62%
(2.9 Mt CO2e) was related to the inclusion of non-lending products
in error and the remaining 38% (1.8 Mt CO2e) was due to the
enhanced product mapping and streamlined approach for emissions
estimates.
The power and utilities baseline for
on-balance sheet financed emissions is now 537.5 tonnes of carbon
dioxide equivalent per gigawatt hour ('tCO2e/GWh') for 2019 versus
589.9 tCO2e/GWh reported in the Annual Report and Accounts
2022. This change reflects the
implementation of the revised aggregation method and enhanced
product mapping.
Revisions
|
Reporting metrics
|
Previously
reported
|
Recalculated
metrics
|
Percentage
change
|
Sector
|
|
2019
|
2020
|
2019
|
2020
|
2019
|
2020
|
Oil and gas
|
On-balance sheet financed - Mt
CO2e
|
33.0
|
30.1
|
28.4
|
25.0
|
(14) %
|
(17) %
|
|
Facilitated (100% weighting) - Mt
CO2e
|
29.5
|
N/A
|
43.2
|
N/A
|
47
%
|
N/A
|
Power and utilities
|
On-balance sheet financed -
tCO2e/GWh
|
589.9
|
509.6
|
537.5
|
511.1
|
(9)
%
|
-
%
|
|
Facilitated (100% weighting) -
tCO2e/GWh
|
360.0
|
N/A
|
420.7
|
N/A
|
17
%
|
N/A
|
Financed emissions
continued
We have set out in the table below
our combined on-balance sheet financed and facilitated emissions
targets for the oil and gas, and power and utilities sectors. These
show the revised baselines.
For facilitated emissions, we track
progress to target using a three-year average moving window
(average of 2020, 2021 and 2022 for the 2022 progress number) and
figures weighted at 33%. This means that transactions facilitated
in 2028 and 2029 will still have an impact on the 2030 progress
number and will need to be taken into consideration as we manage
progress towards our target. We aim to achieve our target in 2030
notwithstanding the application of a three-year average.
The facilitated emissions values
total 17.5 Mt CO2e in 2021 and 14.4 Mt CO2e in 2022 for the oil and
gas sector, and 398.3 tCO2e/GWh for 2021 and 377.6 tCO2e/GWh in
2022 for the power and utilities sector. These values are then
combined with the on-balance sheet numbers for the relevant year to
track progress to target. We set out the annual figures before the
application of the three-year average in the facilitated emissions
table on page 61.
We have also set out our defined
targets for the on-balance sheet financed emissions of the
following sectors: cement; iron, steel and aluminium; aviation;
automotive; and thermal coal mining. We disclose emissions in 2021
and 2022 and progress achieved in 2022 versus baseline for each
sector.
We have implemented a revised
approach to calculate the sector-level intensity metric in 2023,
which has been applied for the recalculated power and utilities
baseline metric, and for 2021 and 2022 actual data for all
intensity-based sectors. Emissions intensity is a weighted average
according to the portfolio weight of each investment, as a
proportion of the total portfolio value.
The progress figures show the trend
in financed emissions before targets were set. Targets were set for
oil and gas, and power and utilities in February 2022, for thermal
coal mining in December 2022, and for the other sectors in February
2023. On the following pages, we provide more granular details of
our financed emissions within these sectors.
When assessing the changes from 2019
to 2022, it is important to emphasise the long-term commitment that
is needed to meet our 2030 interim targets, and how changes to
exposure and market fluctuations impact yearly updates. Movement
from one year to the next may not reflect future trends for the
financed emissions of our portfolio. In the hard-to-abate sectors,
where decarbonisation progress is expected to be slower, we are
taking steps to engage with clients on their transition
plans.
As we are at the beginning of our
journey to track and measure progress, we believe it would be
premature to infer future trends from the 2019 to 2022 progress at
this stage.
Sector 1
|
Baseline
|
2021
|
2022
|
2022 % change vs.
baseline
|
2030
target
|
Unit2
|
Target
scenario
|
Combined on-balance sheet financed and facilitated emissions
at 33%, with three-year moving average
|
Oil and gas
|
42.6 in
2019
|
37.9
|
31.9
|
(25) %
|
(34) %
|
Mt
CO2e
|
IEA NZE
2021
|
Power and utilities
|
513.4 in
2019
|
405.1
|
396.8
|
(23) %
|
138.0
|
tCO2e/GWh
|
IEA NZE
2021
|
|
On-balance sheet financed emissions
|
Cement
|
0.64 in
2019
|
0.70
|
0.71
|
10
%
|
0.46
|
tCO2e/t
cement
|
IEA NZE
2021
|
Iron, steel and aluminium
|
1.8 in
2019
|
2.4
|
2.5
|
38
%
|
1.05
(1.43)3
|
tCO2e/t
metal
|
IEA NZE
2021
|
Aviation
|
84.0 in
2019
|
85.9
|
86.5
|
3
%
|
63.0
4
|
tCO2e/million rpk
|
IEA NZE
2021
|
Automotive
|
191.5 in
2019
|
215.7
|
216.6
|
13
%
|
66.0
|
tCO2e/million vkm
|
IEA NZE
2021
|
Thermal coal mining
|
4.0 in
2020
|
N/A
|
N/A
|
N/A
|
(70)%5
|
Mt
CO2e
|
IEA NZE
2021
|
1
Our absolute and intensity emission metrics and targets are
measured based on the drawn exposures of the counterparties in
scope for each sector. For oil and gas; and power and utilities,
the baseline, 2021, 2022 and target type figures represent revised
combined on-balance sheet financed and facilitated emissions. For
iron, steel and aluminium; cement; aviation; automotive; and
thermal coal mining, the baseline, 2021, 2022 and target type
figures represent on-balance sheet financed emissions (no revisions
applied).
2
For the oil and gas sector, absolute emissions are measured in
million tonnes of carbon dioxide equivalent ('Mt CO2e'); for the
power and utilities sector, intensity is measured in tonnes of
carbon dioxide equivalent per gigawatt hour ('tCO2e/GWh'); for the
cement sector, intensity is measured in tonnes of carbon dioxide
equivalent per tonne of cement ('tCO2e/t cement'); for the iron,
steel and aluminium sector, intensity is measured in tonnes of
carbon dioxide equivalent per tonne of metal ('tCO2e/t metal'); for
the aviation sector, intensity is measured in tonnes of carbon
dioxide equivalent per million revenue passenger kilometres
('tCO2e/million rpk'); for the automotive sector, intensity is
measured in tonnes of carbon dioxide equivalent per million vehicle
kilometres ('tCO2e/million vkm'); and for the thermal coal mining
sector, absolute emissions are measured in million tonnes of carbon
dioxide equivalent ('Mt CO2e').
3
While the iron, steel and aluminium 2030 target is aligned with the
IEA NZE 2021 scenario, we also reference the Mission Possible
Partnership Technology Moratorium scenario, whose 2030 reference
range is shown in parentheses.
4
Our aviation unit includes passenger and cargo tonnes, converted
into revenue passenger kilometre ('rpk'), to align with our target
pathway. This is comparable to revenue tonne kilometre (rtk) using
a 100kg per passenger conversion factor as we already include belly
and dedicated cargo in our production figures. The conversion
factor changed from 95kg per passenger in the previous disclosure
to align with industry practice.
5
The thermal coal mining scope differs from the other sectors. We
include solely emissions from thermal coal production and coal
power generation, rather than the total emissions of a counterparty
within a sector, to reflect the absolute financed emissions
reduction thermal coal mining sector target.
Financed emissions
continued
We plan to report financed emissions
and progress against our targets annually and to be transparent in
our disclosures about the methodologies applied and any challenges
or dependencies. However, financed emissions figures may not be
reconcilable or comparable year on year in future, and baselines
and targets may require recalibration as data, methodologies and
reference scenarios develop.
Consistent with PCAF guidance on
financed emissions accounting, we only consider the outstanding
drawn financing amount given this has a direct link to real economy
emissions.
A number of clients have material
undrawn balances that, if drawn, could significantly increase the
financed emissions related to those clients. We expect to assess
how to manage these exposures on a forward-looking basis as we
progress towards our 2030 targets. In addition, for the
intensity-based sectors, the emissions intensity is sensitive to
material clients and changes to drawn balances year on year can
therefore influence the trend.
We are developing portfolio
modelling capabilities that integrate risk, profitability and
financed emissions to inform decision making and determine how to
best steer our portfolios to meet our financed emissions targets
and commercial and strategic ambitions. As part of this we are
testing and developing an analytics capability that will provide an
up-to-date view of our position relative to our 2030 targets and an
indication of the financed emissions impact of a transaction to
consider alongside risk-return metrics.
For the oil and gas sector, our
analysis included scope 1, 2 and 3 emissions, including carbon
dioxide and methane, for upstream and integrated companies. We
revised our baseline for 2019 and progress figures to reflect
combined on-balance sheet financed and facilitated emissions and
our revised approach.
We have set a target to reduce
absolute on-balance sheet financed emissions and facilitated
emissions for our oil and gas portfolio by 34% by 2030 relative to
a 2019 baseline. This is consistent with a global 1.5°C-aligned
pathway as defined by the IEA NZE 2021 scenario. This target is
unchanged with the inclusion of facilitated emissions. We plan to
update our target following the periodic release of new
1.5°C-aligned scenarios in the years ahead to reflect shifts in the
real economy.
Our core approach as we progress
towards our portfolio decarbonisation targets is to
engage with major oil and gas
customers to understand their transition plans and to help support
and accelerate those efforts. This is in line with the Group's
energy policy, which supports the phasing down of fossil fuel
sources with the highest emission intensity as well as financing
restrictions for projects relating to new oil and gas fields, and
infrastructure.
In 2022, absolute combined
on-balance sheet financed and facilitated emissions decreased by
25% to 31.9 Mt
CO2e relative to the 2019 baseline, and by 16% from 2021 to 2022. This decline was achieved
through a risk-weighted assets reduction strategy and aided by
market conditions, with stronger oil and gas cash flows and higher
interest rates resulting in reduced demand for bank debt and
capital markets financing. Market dynamics will continue to create
volatility in future years as we make progress towards our financed
emissions target.
Oil
and gas
Mt
CO2e
|
2022 progress from
baseline
|
|
(25)%
|
Power and utilities
For the power and utilities sector,
our analysis included scope 1 and 2 emissions for upstream power
generation companies. Although scope 1 emissions are most material
for the sector, most companies report scope 1 and 2 emissions
together making it challenging to split out the data. We revised
our baseline for 2019 and progress figures to reflect combined
on-balance sheet financed and facilitated emissions and our revised
approach.
We have set a target to reduce the
financed emissions intensity of our on-balance sheet and
facilitated power and utilities portfolio to 138 tCO2e/GWh by 2030.
This target is unchanged with the inclusion of facilitated
emissions. We have chosen an intensity-based target as electricity
demand is expected to more than double by 2050 due to both
population growth and electrification required to decarbonise
mobility, buildings, and industry. We have focused on power
generation companies because they control sector output. By
engaging with them, we believe we can help drive the most material
emissions impact in the real economy.
Our target is consistent with a
global 1.5°C-aligned pathway, as defined by the IEA NZE 2021
scenario. We plan to refresh our target following the periodic
release of new 1.5°C-aligned scenarios in the years
ahead.
In 2022, our combined on-balance
sheet financed and facilitated emissions intensity decreased by
23% to 396.8
tCO2e/GWh relative to the 2019 baseline. This reduction was driven
by an increase in financing of renewable energy projects and
companies, and a decrease in financing of high emissions intensity
clients. Over the period from 2022 to 2021 the fall in sector
portfolio financed emissions was a more modest 2%.
Over the reported period, the
average emissions intensity of clients for whom we helped raise
funds in the capital markets was lower than for clients financed
directly on our balance sheet. This means the combined on-balance
sheet financed and facilitated emissions intensity from 2019 to
2022 was lower than for on-balance sheet financing
alone.
Power and utilities
tCO2e/GWh
|
2022 progress from
baseline
|
|
(23)%
|
Financed emissions
continued
Cement
For the cement sector, our analysis
included scope 1 and 2 emissions for midstream companies with
clinker and cement manufacturing facilities.
In line with the IEA NZE 2021
scenario, we target an on-balance sheet financed emissions
intensity of 0.46 tonnes of carbon dioxide equivalent per tonne of
cement ('tCO2e/t cement') by 2030, using 2019 as our baseline.
While some emissions reductions can be achieved through energy
efficiency, we believe that to significantly reduce fuel and
process emissions from cement manufacturing, and to meet our
targets, large-scale investments are required in new technologies,
including clinker substitution, alternative fuel use such as
bioenergy, and carbon capture use and storage.
Our 2022 emissions intensity was
10% higher than the 2019 baseline due to
higher drawn balances for emissions intensive clients, but at
0.71 tCO2e/t cement in 2022, it was
marginally up by 1% from 2021.
Our cement portfolio is relatively
concentrated in customer numbers, and even where customers have set
science-based targets there is still a risk of pledges not turning
into the necessary emissions reductions if technologies do not
scale in time. It will be important, therefore, to regularly review
progress on technology scaling across the industry over the years
ahead to 2030. For cement and the other intensity-based sectors we
plan to integrate net zero considerations into our transaction
processes and controls and we expect this to help guide our
activities towards progressive alignment of the portfolio with our
2030 targets.
Cement
tCO2e/t cement
|
2022 progress from
baseline
|
|
10%
|
Iron, steel and aluminium
We covered scope 1 and 2 for
midstream iron, steel and aluminium production in our analysis. Due
to the low significance of the aluminium sector's financed
emissions within our portfolio, we combined them with our iron and
steel financed emissions. In the event that aluminium becomes a
more material part of our portfolio in the future, we may consider
creating a separate target for aluminium production given the
varied decarbonisation pathway for this metal.
For the iron, steel and aluminium
sector, we target an on-balance sheet financed emissions intensity
of 1.05 tonnes of carbon dioxide equivalent per tonne of metal
('tCO2e/t metal') by 2030, using the IEA NZE 2021 scenario as our
core scenario and 2019 as our baseline. Due to the challenges
of
decarbonising this hard-to-abate
sector, we also outline an alternative scenario from the Mission
Possible Partnership ('MPP').
The emissions intensity in 2022 rose
by 38% to 2.5
tCO2e/t metal against our 2019 baseline and by 4% versus 2021. This was due to increased financing to
the aluminium sector, which has a higher carbon intensity than that
of steel.
We aim to actively manage our
portfolio to achieve our 2030 financed emissions target for our
iron, steel and aluminium portfolio, taking into account the
actions our customers are taking to achieve emissions
reductions.
Iron, steel and aluminium
tCO2e/t metal
|
2022 progress from
baseline
|
|
38%
|
Aviation
In the aviation sector, we included
passenger airlines' scope 1 and aircraft lessors' scope 3
downstream emissions. We excluded military and dedicated cargo
flights as the emissions intensity of such cargo flights is
different to that of passenger airlines. This approach is in line
with industry practice to ensure consistency of financed emissions
measurement and target setting.
Aligned with the IEA NZE 2021
scenario, we target an on-balance sheet financed emissions
intensity of 63.0 tonnes of carbon dioxide equivalent per million
revenue passenger kilometres ('tCO2e/million rpk') by 2030, using
2019 as our baseline. To reach these intensity levels and help meet
our targets, we believe the sector needs significant policy
support, investments in alternative fuels, such as sustainable
aviation fuel, and new aircraft to reduce emissions.
The industry is also adopting the
unit of revenue tonne kilometre ('rtk') to take into account the
transport of cargo for airlines in scope of the target. We will
consider this as part of our methodology enhancement.
At 86.5
tCO2e/million rpk in 2022, the emissions intensity increased by
3% versus the 2019 baseline and was
marginally up by 1% from 2021. In 2020
there was a peak in emissions intensity due to the impact of the
Covid-19 pandemic, as planes carried fewer passengers.
We plan to engage with our major
customers on their transition plans, as well as integrate financed
emissions implications into transaction and portfolio management
for the sector.
Aviation
tCO2e/million rpk
|
2022 progress from
baseline
|
|
3%
|
Financed emissions
continued
Automotive
For the automotive sector, we looked
at scope 1, 2 and 3 emissions from the midstream manufacturing of
vehicles, and tank-to-wheel exhaust pipe emissions for light-duty
vehicles. We excluded heavy-duty vehicles from our analysis as the
target pathway derived from the IEA excludes them, as they have a
different decarbonisation pathway relative to light-duty vehicles.
This approach is in line with industry practice to ensure
consistency of financed emissions measurement and target setting.
We will consider including heavy-duty vehicle manufacturers as well
as heavy-duty vehicle production at a later stage of our analysis,
as data and methodologies develop.
We target an on-balance sheet
financed emissions intensity of 66.0 tonnes of carbon dioxide
equivalent per million vehicle kilometres ('tCO2e/million vkm') by
2030
using 2019 as our baseline. This is
in line with the IEA NZE 2021 scenario, which is a 1.5C° aligned
pathway, modified to match the share of new in-year vehicle sales
for light-duty vehicles. Decarbonisation of the automotive sector,
and therefore our ability to meet our targets, needs large-scale
investments in new electric vehicle and battery manufacturing
plants, widespread charging infrastructure, and government policies
to support electric vehicles.
Our 2022 emissions intensity rose by
13% to 216.6
tCO2e/million vkm against our 2019 baseline and stayed level with
2021. This increase, after an 8% reduction
in 2020 versus 2019, was caused by a shift in the portfolio towards
companies producing more emissions-intensive vehicles. This can be
the case for manufacturers that produce more sports utility
vehicles or fewer electric vehicles.
Automotive
tCO2e/million vkm
|
2022 progress from
baseline
|
|
13%
|
Thermal coal mining
For the thermal coal mining sector,
our analysis focused on scope 1, 2 and 3 emissions in upstream
companies, including those involved in extraction. The majority of
our financed emissions relate to scope 3 emissions associated with
coal mining.
We set an absolute on-balance sheet
reduction target of 70% for 2030, from an absolute 2020 baseline
measure of 4.0 Mt CO2e. We used 2020 as a
baseline to align with the baseline used for our drawn balance
exposure targets in the thermal coal phase-out policy. The financed
emissions target is aligned with the IEA NZE 2021
scenario.
When calculating our financed
emissions from thermal coal mining, we focused on thermal coal
extraction and processing companies, and diversified mining
companies. We aim to measure and focus on our customers with the
most material thermal coal-related emissions in order to help drive
a meaningful impact in the real economy.
Thermal coal mining
Mt
CO2e
|
2022 progress from
baseline
|
|
N/A
|
Financed emissions
continued
On-balance sheet financed emissions
The table below summarises the
results of our assessment of on-balance sheet financed emissions
using 2021 and 2022 data. For thermal coal mining, disclosures
commenced in 2020 to align with thermal coal exposure reporting
metrics. The PCAF data quality score has not improved for 2022 due
to limited availability of actual reported emissions from our
customers.
|
On-balance sheet financed emissions - wholesale credit
lending and project finance1,2
|
Sector
|
Year
|
Scope
1-2 (Mt COe2)†
|
Scope 3
(Mt CO2e)†
|
Emissions intensity4
|
PCAF
data quality score3,†
|
Scope 1
and 2
|
Scope
3
|
Oil and gas
|
2021
|
2.1
|
18.4
|
N/A
|
2.8
|
2.9
|
2022
|
1.3
|
16.2
|
N/A
|
3.2
|
3.2
|
Power and utilities
|
2021
|
8.1
|
N/A
|
407.0
|
2.9
|
N/A
|
2022
|
7.6
|
N/A
|
401.7
|
3.3
|
N/A
|
Cement
|
2021
|
2.2
|
N/A
|
0.70
|
2.8
|
N/A
|
2022
|
4.5
|
N/A
|
0.71
|
2.9
|
N/A
|
Iron, steel and aluminium
|
2021
|
2.0
|
N/A
|
2.4
|
3.0
|
N/A
|
2022
|
2.7
|
N/A
|
2.5
|
3.0
|
N/A
|
Aviation
|
2021
|
2.7
|
0.16
|
85.9
|
3.0
|
3.3
|
2022
|
2.6
|
0.15
|
86.5
|
3.3
|
2.4
|
Automotive
|
2021
|
0.07
|
3.6
|
215.7
|
2.8
|
2.9
|
2022
|
0.12
|
5.4
|
216.6
|
2.7
|
2.9
|
Thermal coal mining
|
2020
|
0.17
|
3.8
|
N/A
|
3.0
|
3.0
|
Facilitated emissions
The table below summarises the
results of our assessment of facilitated emissions from 2019 to
2022 for the oil and gas, and power and utilities
sectors.
Applying a 100% weighting, the oil
and gas values for scope 1 to 3 emissions decreased from 43.2 Mt
CO2e in 2019 to 15.2 Mt CO2e in 2022. For the power and utilities
sector, the values for scope 1 and 2 emissions fell from 8.5 Mt
CO2e in 2019 to 3.8 Mt CO2e in 2022. For all 100%-weighted
facilitated values, please refer to the ESG Data Pack. The total
capital markets activity analysed applying a 100% weighting in 2019
was $22.6bn, representing 5.5% of capital markets activity at 31
December 2019. In 2020, it was $26.0bn, representing 6.2% of
capital markets activity at 31 December 2020. In 2021, it was
$18.1bn, representing 4.1% of capital markets activity at 31
December 2021. In 2022, it was $10.4bn representing 3.2% of capital
markets activity at 31 December 2022.
|
Facilitated emissions - ECM, DCM and syndicated loans
(33% weighting)
|
Sector
|
Year5
|
Scope
1-2 (Mt CO2e)†
|
Scope 3
(Mt CO2e)†
|
Emissions intensity4
|
PCAF
Data quality score3,†
|
Scope 1
and 2
|
Scope
3
|
Oil and gas
|
2019
|
1.6
|
12.7
|
N/A
|
2.3
|
2.7
|
2020
|
2.7
|
24.0
|
N/A
|
2.0
|
2.1
|
2021
|
0.90
|
10.5
|
N/A
|
2.9
|
3.1
|
2022
|
0.36
|
4.7
|
N/A
|
3.3
|
3.3
|
Power and utilities
|
2019
|
2.8
|
N/A
|
420.7
|
2.5
|
N/A
|
2020
|
2.1
|
N/A
|
410.1
|
2.5
|
N/A
|
2021
|
1.5
|
N/A
|
364.1
|
2.9
|
N/A
|
2022
|
1.2
|
N/A
|
358.7
|
2.9
|
N/A
|
1
The total amount of short-term finance excluded for the thermal
coal mining sector was $0.37bn in 2020; for all other sectors it
was $7.0bn in 2021 and $8.5bn in 2022.
2
The total loans and advances analysed in 2020 for the thermal coal
mining sector were $2.89bn, representing 0.28% of total loans and
advances to customers at 31 December 2020. For all other sectors in
2021, they were $24.1bn representing 2.3% of total loans and
advances to customers at 31 December 2021 and in 2022, they were
$23.6bn representing 2.6% of total loans and advances to customers
at 31 December 2022. The total loans and advances analysed for the
purpose of the financed emissions calculation and reporting have
not been adjusted for assets held for sale.
3
PCAF scores where 1 is high and 5 is low. This is a weighted
average score based on financing for on-balance sheet financed
emissions.
4
Emissions intensity under the new aggregation
method.
5
Due to timing differences the approach for calculating 2021-2022
facilitated emissions has been enhanced compared to that of
2019-2020. Enhancements are
mainly data and process-related for the later years to
include more consistent and higher quality data sources and are
therefore applied prospectively in line with
our recalculation policy. Small methodology changes were
applied as well but these do not materially change our 2019-2020
numbers.
†
Data is subject to independent limited assurance by PwC in
accordance with ISAE 3000/ ISAE 3410. For further details, see our
Financed Emissions and Thermal Coal Exposures Methodology and PWC's
limited assurance report, which are available at
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
Financed emissions
continued
Integrating net zero into
transaction and portfolio decision making
In 2023, we began to embed net zero
factors alongside standard risk-return and other considerations
when evaluating specific transactions starting with oil and gas,
power and utilities, and thermal coal mining sectors.
We have been testing and developing
an analytics capability that, where relevant, begins to provide
front-line business teams and management with insight on the
up-to-date on-balance sheet financed emissions and facilitated
emissions position of a sector, the impact of a transaction where
material, and implications relative to pathways in line with our
2030 targets.
We continued our efforts to design
and implement a differentiated approach to understand and assess
the transition plans and risks of our corporate customers,
including state-owned enterprises. These assessments help us to
identify opportunities, manage climate risks and define areas to
drive strategic engagement with each corporate customer.
In 2023, we completed assessments
for most customers in scope of our thermal coal phase-out policy.
We also completed assessments for customers that make the most
material contribution to our financed emissions in the oil and gas,
and power and utilities sectors.
Once completed, these assessments
can be used to support business decisions in relation to our
financed emissions portfolio management and alignment, and our
climate risk management efforts.
Our processes and controls will
continue to evolve as we look at net zero considerations for
sectors, customers and deals with higher climate impact and risk.
These considerations include: adherence with our sustainability
risk policies; climate-related credit risk; customer transition
plan assessment outcomes (where relevant); reputational risk
considerations; and financed and, where applicable, facilitated
emissions implications (where transactions are in scope of our
financed emissions disclosures and 2030 targets). We have dedicated
governance, with escalation pathways for deals deemed high risk,
including in terms of financed emissions implications and
reputation risk.
|
Reducing landfill waste and
emissions in the Philippines
We are supporting a company that is
seeking to tackle the problem of overflowing landfills, which will
help reduce methane emissions and create potential new jobs in the
Philippines.
In June 2023, we provided a
subsidiary of Prime Infrastructure Capital, a sustainable
infrastructure firm with services that span energy, water
distribution and waste management, with a $24.5m green loan. The
loan was provided to finance its acquisition and expansion of a
waste management facility in Cebu, Philippines.
The company has increased the
facility's capacity to treat and recycle domestic and industrial
solid waste, and is developing its capabilities to convert organic
and agricultural feedstock waste into sustainable, refuse-derived
fuel.
The funding is expected to help to
divert waste away from landfill, which will reduce methane
emissions generated by decomposing organic waste.
|
|
Reducing emissions in our assets
under management
In July 2021, our asset management
business, HSBC Asset Management, signed up to the Net Zero Asset
Managers initiative, which encourages investment firms to commit to
managing assets in line with achieving net zero emissions by 2050
or sooner. HSBC Asset Management continues to work towards its
ambition of reducing scope 1 and 2 financed emissions intensity by
58% by 2030 for 38% of its total assets under management. These
listed equity and corporate fixed income assets amounted to
$193.9bn at 31 December 2019. We use 2019 as the baseline year for
our calculations. Implementation of the net zero targets remains
subject to consultation with stakeholders including investors, fund
boards and regulators.
In 2023, HSBC Asset Management
worked to develop solutions for clients to address climate
ambitions while investing. Further data science expertise will be
added to support sustainability through the creation of a
Sustainable Investment Solutions Lab. HSBC Asset Management
reported an update through the Principles for Responsible
Investment annual submission, as required under its Net Zero Asset
Managers commitment. As part of its thermal coal policy, it
fulfilled a commitment to initiate engagement with all listed
issuers held in active fundamental portfolios with more than 10%
revenue exposure to thermal coal.
|
Embedding net zero into the way we operate
Net zero in our own
operations
Part of our ambition to be a net
zero bank is to achieve net zero carbon emissions in our operations
and supply chain by 2030.
Reduce, replace and remove
We have three elements to our
strategy: reduce, replace and remove. We plan to first focus on
reducing carbon emissions from consumption, and then replacing
remaining emissions with low-carbon alternatives in line with the
Paris Agreement.
We plan to remove the remaining
emissions that cannot be reduced or replaced by procuring, in
accordance with prevailing regulatory requirements, high-quality
offsets at a later stage. We are working
on our carbon credits strategy by engaging with a range of market
participants.
Our
energy consumption
In October 2020, we announced our
ambition to reduce our energy consumption by 50% by 2030, against a
2019 baseline, and in 2023 we achieved 26.3%. We continue to work to do this by optimising the use of our
real estate portfolio, and carrying out a strategic reduction in
our office space and data centres. We are using new technology and
emerging products to make our spaces more energy
efficient.
As part of our ambition to achieve
100% renewable electricity across our operations by 2030, we
continue to look for opportunities to procure green electricity in
each of our markets. In 2023, our fourth UK renewable
power purchase agreement ('PPA') went live in Sorbie, Scotland. A key
challenge remains the limited opportunity to pursue PPAs or green
tariffs in key markets due to regulations.
Business travel
Our ambition is to halve travel
emissions by 2030, compared with pre-pandemic levels. In 2023, our
travel emissions remained below 50% of our 2019 baseline, despite
the lifting of international travel restrictions. We are closely
managing the gradual resumption of travel through internal
reporting and review of emissions, internal carbon budgets and the
introduction of emissions information at the point of booking. With
hybrid working embedded across the organisation, the use of virtual
working practices has reduced the need for our colleagues to travel
to meet with other colleagues and customers.
We continue to focus on reducing the
environmental impact from the vehicles we use in our global
markets, and accelerate the use of electric vehicles. In 2023, we
reduced the company car fleet size by 9% compared with 2022. We are
now aiming to ensure that all new vehicles ordered are fully
electric or hybrid vehicles where possible.
Engaging with our supply chain
Our supply chain is critical to
achieving our net zero ambitions, and we are partnering with our
suppliers on this journey. Since 2020, we have been encouraging our
largest suppliers to make their own carbon commitments, and to
disclose their emissions via the CDP (formerly the Carbon
Disclosure Project) supply chain programme. In 2023, suppliers
representing 70.6% of total supplier spend completed the CDP
questionnaire, compared with 63.5% in 2022.
We will continue to engage with our
supply chain through CDP, and through direct discussions with our
suppliers on how they can further support our transition to net
zero.
In 2023, we launched our supplier
net zero guides, providing further details to support suppliers in
understanding our net zero ambitions, as set out in our supplier
code of conduct. We are developing internal decarbonisation plans
for the highest-emitting procurement categories (IT hardware, real
estate, data centre and servers, and telecom services), to be
included in category strategies and to support future supplier
selection.
Focus on natural resources
Alongside our net zero operations
ambition, our aim is to be a responsible consumer of natural
resources. Through design, construction and operational standards,
we strive to ensure that, wherever possible, our premises do not
adversely affect the environment or natural resources. We have
identified specific focus areas including waste, paper and
sustainable diets, and are exploring key opportunities to reduce
our wider environmental impact over the coming decade.
Our
presence in environmentally sensitive areas
As a global organisation, our
branches, offices and data centres may be located in areas of high
or very high water stress and/or protected areas of biodiversity,
as we support our customers and communities in these
locations.
Approximately 55% of our global offices, branches and data centres
are located in areas identified as being subject to high and very
high water stress, accounting for 50% of
our annual water consumption. These are predominantly urban or city
centre locations with large, concentrated populations. Our industry
is a low user of potable water, and we have implemented measures to
further reduce water consumption through the installation of flow
restrictors, auto-taps and low or zero flush sanitary
fittings.
In addition, 0.9% of our global office, branch and data centre
portfolio lies in protected areas of biodiversity. We strive
through our design, construction and operational standards to
ensure that, where possible, our premises do not adversely affect
the environment or natural resources in these areas.
|
|
Our environmental and sustainability
management policies
Our buildings policy recognises that
regulatory and environmental requirements vary across
geographies and may include
environmental certification. The policy is supported by
Corporate Services procedures on
environmental and sustainability management, seeking to ensure
that
HSBC's properties continually reduce
their overall direct impact on the environment. Detailed
design considerations documented in
our Global Engineering Standards aim to reduce or
avoid depletion of critical
resources, such as energy, water, land and raw materials. Suppliers
are
required to adhere to strict
environmental management principles and reduce their impact
on
the environment in which they
operate.
|
Net zero in our own operations
continued
Emissions from our energy and travel
We report our emissions following
the Greenhouse Gas Protocol, which incorporates the scope 2
market-based emissions methodology. We report
greenhouse gas emissions resulting from the energy used in our
buildings and employees' business travel. Due to the nature
of our primary business, carbon dioxide is the main type of
greenhouse gas applicable to our operations. While the amount is
immaterial, our current reporting also incorporates methane and
nitrous oxide for completeness. Our environmental data for our own
operations is based on a 12-month period to 30
September.
In 2023, we reduced emissions from
our energy consumption and travel to 293,333 tonnes CO2e, which represents a
57.3% reduction compared with our
2019 baseline. This was mainly attributed to:
- travel
volumes remaining low compared with pre-pandemic levels;
- an
increase in our consumption of renewable electricity to
58.4%; and
- the
reduction of energy consumption as a result of strategic footprint
reductions and the implementation of over 450 energy conservation
measures, which amounted to an estimated energy avoidance in excess
of 12 million kWh.
Emissions from business travel
increased compared with 2022, due to the easing of pandemic-related
travel restrictions which resulted in a return to travel. A
decrease in scope 1 emissions was partly attributed to a correction
in the classification of road-based business travel in the UK and
India from scope 1 to scope 3.
In 2023, we collected data on energy
use and business travel for our operations in 34 countries and
territories, which accounted for approximately 96.0% of our full-time employees ('FTEs'). To estimate
the emissions of our operations in entities where we have
operational control and a small presence, we scale up the emissions
data from 96.0% to 100%. We then apply
emission uplift rates to reflect uncertainty concerning the quality
and coverage of emission measurement and estimation. This is
consistent with both the Intergovernmental Panel on Climate
Change's Good Practice Guidance and Uncertainty Management in
National Greenhouse Gas Inventories and our internal analysis of
data coverage and quality.
Emissions from our supply chain
Our calculation methodology uses
supplier emissions data where we have it from suppliers, through
CDP. Where we do not have actual emissions data, we use industry
average carbon intensities and spend data to determine their
contribution to our supply chain emissions. As more of our
suppliers report their emissions, we should be able to include more
accurate data and fewer industry averages in the calculation.
We have applied a data quality score to the
sources of data we used to determine counterparty emissions. For
further details, see our GHG (Greenhouse Gas) Reporting Guidance at
www.hsbc.com/esg.
In 2022, we disclosed our supply
chain emissions for the first time, using supplier emissions data
and industry averages where actual data was not available. This
approach is heavily dependent on external data sources to calculate
estimates of our supply chain emissions.
In 2023, emissions from our supply
chain reduced by 3% compared with 2022.
This is due to a reduction in spend and an increase in the
availability of actual emissions data from our suppliers. Emissions
have increased by 13% compared with 2019,
as industry averages remain significantly elevated. Due to
volatility in industry average data, we will undertake a review of
our data sources and methodology during 2024. As supplier emissions
reporting matures, we will be able to include more actual data and
fewer industry averages in the methodology. Our
initial supply chain emission figures may require updating as data
availability changes over time and methodologies and climate
science evolve.
For further details
of our methodologies and relevant environmental key facts, see
the ESG Data Pack at www.hsbc.com/esg.
Energy and travel greenhouse gas emissions in tonnes
CO2e
|
|
|
|
2023
|
2022
|
2019
baseline
|
Scope 11
|
Ä
|
16,918
|
19,329
|
22,066
|
Scope 2
(market-based)1
|
Ä
|
167,174
|
223,334
|
392,270
|
Scope 3
|
~
|
1,090,280
|
1,052,264
|
1,139,260
|
Category 1: Purchased goods and
services1,2
|
Ä
|
859,256
|
865,747
|
829,635
|
Category 2: Capital
goods1,2
|
Ä
|
121,783
|
144,232
|
37,617
|
Category 6: Business
travel1
|
~
|
109,241
|
42,285
|
272,008
|
Total
|
Ä
|
1,274,372
|
1,294,927
|
1,553,596
|
Included energy UK
|
Ä
|
5,909
|
9,264
|
10,432
|
1
Our data is now presented on an absolute value basis and not
rounded values. Data in 2023 is subject to an independent limited
assurance by PwC in accordance with International Standard on
Assurance engagements 3410 (Assurance Engagements on Greenhouse Gas
Statements). For further details, see GHG Reporting Guidance 2023
and third-party limited assurance report at
www.hsbc.com/our-approach/esg-information/esg-reporting-and-policies.
In respect of data in 2019 and 2022, see our relevant
Annual Report and Accounts.
2 Supply chain emissions calculated using a
combination of supplier emissions data and industry averages. A
data quality score is applied to this calculation where 1 is high
and 5 is low, based on the quality of emissions data. This is a
weighted average score based on HSBC supplier spend and is in line
with HSBC's financed emissions reporting methodology. Data quality
scores can be found in the ESG Data Pack.
For further details
of our methodologies, our PwC limited assurance reports and
relevant environment key facts, see our ESG Data Pack
at
www.hsbc.com/esg.
|
Greenhouse gas emissions in tonnes CO2e per
FTE
|
|
Energy consumption in kWh in
000s
|
|
|
2023
|
2022
|
2019
baseline
|
|
|
|
2023
|
2022
|
2019
baseline
|
Scope 1, 2 and 3 (Category
6)
|
~
|
1.3
|
1.3
|
2.9
|
|
Total
|
Ä
|
772,736
|
797,264
|
913,556
|
Scope 1, 2 and 3 (Category 1, 2 and
6)
|
Ä
|
5.8
|
5.9
|
6.6
|
|
UK only
|
Ä
|
209,939
|
222,322
|
281,271
|
Climate risk relates to the
financial and non-financial impacts that may arise as a result of
climate change and the move to a net zero economy. We manage
climate risk across all our businesses and are incorporating
climate considerations within our traditional risk types in line
with our Group-wide risk management framework.
Our material exposure to climate
risk relates to wholesale and retail client financing activity
within our banking portfolio. We are also exposed to climate risk in relation to asset
ownership by our insurance business and employee pension
plans. Our clients are exposed to climate-related investment
risk in our asset management business.
In the table below, we set out our
duties to our stakeholders in our four most material
roles.
For further details
of our approach to climate risk, see 'ESG risk' on page
141 and 'Climate risk' on page
221.
|
|
|
|
|
|
|
|
|
|
Banking
We manage the climate risk in our
banking portfolios through our risk appetite and policies for
financial and non-financial risks.
|
|
Employee pensions
Our pension plans manage climate
risk in line with their fiduciary duties towards members and local
regulatory requirements.
|
|
Asset management
Climate risk management is a key
feature of our investment decision making and portfolio management
approach.
|
|
Insurance
We consider climate risk in our
portfolio of assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This helps enable us to identify
opportunities to support our customers, while continuing to meet
stakeholder expectations.
|
|
We monitor climate risk exposure
internally for our largest plans based on asset sector allocation
and carbon emissions data where available.
|
|
We also engage with companies on
topics related to climate change.
|
|
We have established an evolving ESG
programme to meet changing external expectations and customer
demands.
|
|
|
|
|
|
|
|
|
|
|
Banking
Our banking business is well
positioned to support our customers managing their own climate risk
through financing. For our wholesale customers, we use our
transition engagement questionnaire to understand clients' climate
strategies and risks. We have set out a suite of policies to guide
our management of climate risk. We
continue to develop our climate risk appetite and metrics to help
manage climate exposures in our wholesale and retail portfolios.
We also develop and use climate scenario analysis
to gain insights on the long-term effects of transition and
physical risks across our wholesale and retail banking
portfolios (for further details, see page 225).
Asset management
HSBC Asset Management recognises
that climate risk may manifest as transition and physical risks
over the short, medium and long term. The impact of climate-related
risk will vary depending on characteristics such as asset class,
sector, business model and geography. Where applicable and
relevant, HSBC Asset Management incorporates climate-related
indicators, such as carbon intensity and management of carbon
emissions, into investment decisions as well as insights from its
climate-related engagement.
Work continues on the integration of
ESG and climate analysis into HSBC Asset Management's actively
managed product offerings to help ensure the climate risks faced by
companies are considered when making investment decisions and to
assess ESG risks and opportunities that could impact investment
performance.
HSBC Asset Management engages with
investee companies on a priority list as defined in its Global
Stewardship Plan, and votes at company general meetings, including
on the topic of climate change. It also
works with collaborative engagement initiatives such as Climate
Action 100+ and Nature Action 100.
For further details of the HSBC Global Asset Management (UK)
Limited's annual TCFD
Report, see
www.assetmanagement.hsbc.co.uk/-/media/files/attachments/uk/common/tcfd-report-2022.pdf.
Employee pensions
The Trustee of the HSBC Bank (UK)
Pension Scheme, our largest plan with $36bn assets under
management, aims to achieve net zero greenhouse gas emissions
across its defined benefit and defined contribution assets by 2050.
To help achieve this, it is targeting an interim emissions
reduction of 50% by 2030, from 2019 levels, for its equity and
corporate bond mandates. This commitment was made in the context of
wider efforts to manage the impact of climate change on the
Scheme's investments and the consequent impact on the financial
interests of members.
The Scheme, which has reported
emission reductions for its listed equity and corporate bond
mandate portfolios between 2019 and 2022 through its annual TCFD
Report, will continue to report against the 2030 targets and aims
to widen the coverage of its assessment and reporting over time. In
2023, its asset managers were formally notified of the Trustee's
ESG risk mitigation priorities and encouraged to develop
commensurate risk mitigation strategies. The manager monitoring and
selection processes now explicitly include assessment of these
strategies where financially material.
For further details
of the HSBC Bank (UK) Pension Scheme's annual TCFD statements and
climate action plan, see
http://futurefocus.staff.hsbc.co.uk/active-dc/information-centre/other-information.
Insurance
In 2023, our Insurance business
updated its sustainability procedures to align with the Group's
updated energy and thermal coal-phase out policies. We also
delivered ESG product marketing guidelines with insurance examples
and training.
In response to various ESG regulatory initiatives and developments, HSBC's
insurance manufacturing entities in the EU, which are in Malta and
France, have continued to implement key
disclosure-related regulatory requirements, including
pre-contractual reporting, client periodic reporting and
sustainable investment impact statements. Related requirements for
the UK are expected to be introduced in 2024.
Sustainability risk
policies
Our sustainability risk policies
help to set out our appetite for financing and advisory activities
in certain sectors. Our policies are important mechanisms for
delivering our net zero ambitions, as well as for managing
sustainability risks.
Our
policies
Our sustainability risk policies
comprise our core net zero-aligned policies - thermal coal
phase-out and energy - and our broader sustainability risk policies
covering: agricultural commodities, chemicals, forestry, mining and
metals, and World Heritage Sites and Ramsar-designated wetlands. We
also apply the Equator Principles when financing relevant
projects.
Our sustainability risk policies
focus on mitigating the negative impacts of specific sectors on
people and the environment. Our net zero policies, including energy
and thermal coal phase-out, also support our ambition to transition
to net zero. Engaging with customers on their transition plans is a
key aspect of our net zero policy approach. These policies aim to
provide clear signals to our customers on how our appetite and
expectations for different activities are changing, as well as how
we will consider their plans for the future.
We continue to review policy
implementation as we apply our policies in practice, and our
operationalisation of such policies continues to be
enhanced. We take a risk-based approach
when identifying transactions and clients to which our energy and
thermal coal phase-out policies apply, and when reporting on
relevant exposures, adopting approaches proportionate to risk and
materiality. This helps to focus our efforts on areas where we
believe we can help drive meaningful change, while taking into
account experience from policy implementation over time.
We regularly review our policies,
incorporating feedback and building on experience from policy
implementation over time.
Where we identify activities that
could cause material negative impacts, we expect customers to
demonstrate that they are identifying and mitigating risks
responsibly, and we will look to take required actions as outlined
in our policies, which may include applying financing restrictions
or enhanced due diligence.
For further details
of how we manage sustainability risk, as well as our full policies,
see
www.hsbc.com/our-approach/risk-and-responsibility/sustainability-risk.
Governance and implementation
Our Group Risk and Compliance
function has specialists who review and support implementation of
our sustainability risk policies. Our relationship managers are the
primary point of contact for many of our business customers and are
responsible for managing customers' adherence to the sustainability
risk policies. They are supported by sustainability risk managers
across the Group who have local or regional responsibility for
advising on, and overseeing, the management of risks as outlined in
the policies. Where considered appropriate, policy matters are
escalated to relevant internal governance committees.
Oversight of the development and
implementation of policies is the responsibility of relevant
governance committees comprising senior members of the Group Risk
and Compliance function and global businesses.
Biodiversity and natural capital-related
policies
Our sustainability risk policies
impose restrictions on certain financing activities that may have
material negative impacts on nature. While a number of our
sustainability risk policies have such restrictions, our forestry
and agricultural commodities policies focus specifically on a key
nature-related impact: deforestation. These policies require
customers involved with major deforestation-risk commodities to
operate in accordance with sustainable business principles. We also
require palm oil customers to obtain certification under the
Roundtable on Sustainable Palm Oil, and commit to 'No
Deforestation, No Peat and No Exploitation' (see 'Our respect for
human rights' on page 89).
Our
energy policy
Our energy policy covers the broader
energy system, including upstream oil and gas, fossil fuel power
generation, hydrogen, renewables and hydropower, nuclear, biomass
and waste-to-energy sectors.
The policy seeks to balance three
objectives: driving down global greenhouse gas emissions; enabling
an orderly transition that builds resilience in the long term; and
supporting a just and affordable transition, recognising the local
realities in all the communities we serve.
The energy policy was first
published in December 2022 and updated in January 2024. We review
the policy annually to help ensure that it remains aligned with our
net zero by 2050 ambition and strategic objectives.
For further details
of our oil and gas, and power and utilities financed emissions
targets, see the 'Targets and progress' section in 'Financed
emissions on page 57.
For further details
of our energy policy, see
www.hsbc.com/our-approach/risk-and-responsibility/sustainability-risk.
Sustainability risk policies
continued
Our
thermal coal phase-out policy
As set out in the thermal coal
phase-out policy, we are committed to phasing out the financing of
thermal coal-fired power and thermal coal mining in EU and OECD
markets by 2030, and globally by 2040.
Our policy aims to support thermal
coal phase-out aligned to science-based timeframes, recognising the
different pace between advanced and emerging economies. In turn our
policy supports progress towards our financed emissions targets for
the power and utilities and thermal coal mining sectors.
The policy was first published in
December 2021 and is reviewed annually, with the most recent update
in January 2024, to help ensure that it remains aligned with our
commitments and takes into consideration relevant changes in
external factors.
For our thermal coal
phase-out policy, see
www.hsbc.com/-/files/hsbc/our-approach/risk-and-responsibility/pdfs/240125-hsbc-thermal-coal-phase-out-policy.pdf.
For further details
of our thermal coal phase-out policy January 2024 update, see page
71 of our Net Zero Transition Plan
2024, which is available at
www.hsbc.com/who-we-are/our-climate-strategy/our-net-zero-transition-plan.
Thermal coal financing exposures
We intend to reduce thermal coal
financing drawn balance exposure from a 2020 baseline by at least
25% by 2025 and aim to reduce it by 50% by 2030.
In our Annual Report and Accounts 2022, we
acknowledged that our processes, systems, controls and governance
were not yet designed to fully identify and disclose thermal coal
exposures and that we planned to reassess the
reliability of our data and review our basis of preparation to help
ensure that we are reporting all relevant thermal coal exposures
aligned to our thermal coal phase-out policy.
We have now revised the basis of
preparation for our thermal coal exposures. Aligned with our
thermal coal phase-out policy, we applied a risk-based approach to
identify clients and report on relevant exposures. This includes
the use of globally recognised third-party data sources to screen
clients and applies materiality considerations to product type,
customer type and exposure type, which informs inclusion and
exclusion requirements.
Specifically, for product types,
short-term lending exposures are excluded from our thermal coal
financing exposures reporting in line with our financed emissions
methodology. For customer types, exclusions are applied for certain
customer types such as sovereigns and individuals. For exposure
types, a threshold of $15m for drawn balances is applied for
thermal coal financing exposures reporting. For the avoidance of
doubt, the $15m threshold applies only to exposure reporting
analysis and does not apply to the application of the thermal coal
phase-out policy.
For further details of
our Financed Emissions and Thermal Coal Exposures Methodology, see
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
Considering materiality criteria
helps us to focus our efforts on areas where we believe we can help
drive meaningful change, while taking into account experience from
policy implementation over time.
Applying our revised basis of
preparation, our thermal coal financing drawn balance exposure was
approximately $1bn† as at 31 December 2020. We continue
to work on our 2021 and 2022 numbers based on our revised basis of
preparation and expect to report on these in future
disclosures.
For further details
of our approach to financed emissions, see 'Our Approach to
financed emissions' on page 53.
†
Data is subject to independent limited assurance by PwC in
accordance with ISAE 3000/ISAE 3410. For further details, see our
Financed Emissions and Thermal Coal Exposures Methodology and PwC's
limited assurance report, which are available at
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
|
Asset Management policy
HSBC Asset Management published its
own policy on thermal coal in September 2022, and its own energy
policy in November 2023. As an asset manager, it is subject to
separate regulatory and legal obligations to deliver customers'
investment interests and deliver fair outcomes.
Under its thermal coal policy, HSBC
Asset Management will not hold listed securities of issuers with
more than de minimis revenue exposure to thermal coal in its
actively managed funds beyond 2030 for EU and OECD markets, and
globally by 2040. The policy also includes enhanced due diligence
on the transition plans of investee companies with thermal coal
exposure. Companies held in investment portfolios that do not
develop credible plans to transition away from thermal coal could
face voting sanctions and ultimately a divestment of
holdings.
Under its energy policy, HSBC Asset
Management will engage with - and assess the transition plans of -
oil and gas, and power and utilities companies held in its
portfolios. For its active fundamental sustainable named funds, it
will exclude listed issuers whose overall operations are
substantially in unconventional oil and gas, subject to data
availability, and with the level and scope of exclusions to be set
out in fund prospectuses. In its alternatives business, it will not
undertake new direct investments in projects associated with the
energy-related activities identified as excluded from new finance
or advisory services under the Group energy policy. HSBC Asset
Management's policy work will continue to support the Group's
sustainability objectives and the commitment made under the Net
Zero Asset Managers initiative to support investing aligned with
net zero by 2050. We continue on the journey of policy
implementation, including engaging with the companies in which we
invest, and improving the data we rely on to monitor the
policies.
For further details of the energy policy, see
www.assetmanagement.hsbc.lu/-/media/files/attachments/common/energy-policy-en.pdf.
For further details of the thermal coal policy, see
www.assetmanagement.hsbc.co.uk/-/media/files/attachments/common/coal-policy-en.pdf.
|
Partnering for systemic change
Supporting systemic change to
deliver net zero
We recognise that collective action
is critical to achieve net zero. We seek to collaborate with a
range of partners to develop a supportive environment for achieving
net zero and mobilising finance for climate action and nature-based
solutions. Our partnerships vary in scope and form depending on the
sector and geography, as well as our presence in local
markets. We act independently and
voluntarily in our decision making, based on our own business
interests, priorities and objectives, and in accordance with the
laws and regulations of the markets in which we operate.
Working with the public sector
We engage with governments and
public bodies to support the implementation of policies and
regulations, including promoting good practice to develop globally
consistent approaches to nature and climate-related financial
regulation. In 2023, this included:
- working
with the UK Net Zero Council, a cross-government business
partnership, to help address market barriers to delivering net
zero, including high start-up costs for renewable energy projects,
regulatory challenges and uncertainty around policy frameworks;
and
- continuing to engage with Just Energy Transition Partnerships
contributing to Indonesia's comprehensive investment and policy
plan and Vietnam's resource mobilisation plan, which provide
roadmaps for minimising the negative impact on local communities of
phasing out fossil fuels and how banks can support the
transition.
Working with industry
We participate in cross-industry
alliances and initiatives to stimulate industry engagement in
nature and climate-related issues, and improve consistency in
global financial standards, guidance and frameworks to accelerate
implementation. In 2023, these included:
- We are
supporting the widespread adoption of the GFANZ net zero transition
plan framework, as a member of its Principals Group. We also
jointly led a working group to develop guidance for financial
institutions on financing the managed phase-out of coal-fired power
plants in Asia-Pacific.
-
As Chair of the Sustainable
Markets Initiative's ('SMI') Financial Services Taskforce, we have
been actively involved in the publication of industry guidance to
help encourage investment in critical ecosystems and sustainable
agricultural practices. These include sponsorship of a report by
Pollination on financing coastal nature-based solutions, as well as
contributing to the Mangrove Breakthrough initiative's financial
roadmap and the SMI Agribusiness Task Force's blended finance
framework for regenerative farming.
- As a
member of the Taskforce on Nature-related Financial Disclosures
('TNFD'), we have piloted the TNFD beta framework to better
understand our exposure to nature-related risks, including on
subsets of customers. We are currently focused on assessing and
preparing for mandatory nature-related disclosure requirements, and
we continue to engage with TNFD and explore ways it can help us and
our clients to strengthen nature-related reporting.
In 2023, we also supported financial
product development to help mobilise the allocation of capital
towards halting and reversing nature loss:
- We worked
with the ICMA to help develop global guidance for issuers launching
blue bonds - debt instruments that raise capital to finance
sustainable marine and ocean-based projects - including eligibility
criteria, standards for evaluating the impact of projects, and the
steps needed to build the integrity of the blue economy and
mobilise investment.
-
We partnered with Earth
Security to explore the barriers, opportunities and design
options for creating a 'mangrove bond' in Queensland, Australia to
help generate funding to enhance mangrove ecosystems. This led to
the publication of a practical blueprint for investors, banks,
corporates and governments to develop new sustainable fixed income
and investment product opportunities.
Working with civil society and non-governmental
organisations
As part of our global philanthropy,
we have partnered with a range of organisations to support the
acceleration of climate action and investments in
nature.
Our five-year Climate Solutions
Partnership initiative with the World Resources Institute, WWF and
over 50 local partners, continues to support the scaling up of
nature-based solutions and the transition of the energy sector in
Asia. This includes engaging with local enterprises across Asia to
make climate commitments and take corporate action. Under the Asia
Sustainable Palm Oil Links programme, we are working closely with
smallholders and traders to transition to more sustainable
practices and reduce nature-related losses.
We have also established several new
partnerships focused on transitioning industry, decarbonising
global trade and catalysing the new economy. These
include:
- a
three-year partnership with the Apparel Impact Institute to
mobilise blended finance for projects to reduce supply chain
emissions in the global fashion industry;
- a
founding membership of the Capacity-building Alliance for
Sustainable Investment, a global platform providing local capacity
building services and technical assistance to support growth of
transition financing in emerging markets and developing economies;
and
- a
two-year partnership with Repower, a global non-profit initiative
analysing the technical and commercial feasibility of various
options for repowering and repurposing coal-fired power plants to
accelerate the transition to clean energy.
|
|
Unlocking the potential of Chinese
ecosystems
We have been working with the SEE
Foundation in China on a multi-stakeholder pilot project to enhance
the climate resilience and biodiversity of forests, inland
wetlands, and mangroves in several selected local provinces. The
project aims to restore and promote sustainable management of key
ecosystems and improve ecosystem services such as carbon sinks, as
a model for other areas in China and around the world. Its efforts
to reduce emissions, and generate jobs through the support of
sustainable local enterprises, has also unlocked government and
public funding for expansion and gained recognition from the World
Bank and the Chinese government.
|
Our
approach to climate reporting
Task Force on Climate-related
Financial Disclosures ('TCFD')
The table below sets out the 11 TCFD
recommendations and summarises where additional information can be
found.
We have considered our 'comply or
explain' obligation under both the UK's Financial Conduct
Authority's Listing Rules and Sections 414CA and 414CB of the UK
Companies Act 2006, and confirm that we have made disclosures
consistent with the TCFD Recommendations and Recommended
Disclosures, including its annexes and supplemental guidance, save
for certain items, which we summarise below and in the additional information section on page
440.
Recommendation
|
Response
|
Disclosure location
|
Governance
|
|
|
a)
Describe the Board's oversight of climate-related risks and
opportunities (Companies Act 2006 - Sections 414CA and 414CB 2A
(a))
|
Process, frequency and
training
|
- The Board
takes overall responsibility for ESG strategy, overseeing executive
management in developing the approach, execution and associated
reporting. It considered ESG at eight
meetings during the year.
- Board
members receive ESG-related training as part of their induction and
ongoing development, and seek out further opportunities to build
their skills and experience in this area.
|
Pages 88 and 256
Page
88
|
Sub-committee accountability,
processes and frequency
|
- The Group
Audit Committee ('GAC') considered ESG and climate reporting
matters at eight meetings during 2023. Furthermore, as an area of
expanded assurance, the GAC, supported by the executive-level ESG
Committee, provided close oversight of the disclosure risks in
relation to ESG and climate reporting, amid rising stakeholder
expectations.
- The Group
Risk Committee ('GRC') received reports on climate risk management,
energy and thermal coal phase-out policies, while maintaining
oversight of delivery plans to ensure that the Group develops
robust climate risk management capabilities. It considered ESG risk
at five meetings in 2023.
- The
diagram on page 88 provides an illustration of our ESG governance process,
including how the Board's strategy on climate is cascaded and
implemented throughout the organisation. It identifies examples of
forums that manage both climate-related opportunities and risks,
along with their responsibilities and the responsible
chair.
|
Page
267
Pages 275 and 278
Page
88
|
Examples of the Board and relevant
Board committees taking climate into account
|
- The Board
considered whether to establish a Board committee dedicated to ESG
issues, but instead decided that the best way to support the
oversight and delivery of the Group's climate ambition and ESG
strategy was to retain governance at Board level.
- In 2023,
the Board oversaw the implementation of ESG strategy through
regular dashboard reports and detailed updates including: review
and approval of the net zero transition plan, deep dives on the
sustainability execution programme, reviews of net zero-aligned
policies and climate-aligned financing initiatives.
|
Page
254
Page
254
|
b)
Describe management's role in assessing and managing
climate-related risks and opportunities (Companies Act 2006 -
Sections 414CA and 414CB 2A (a))
|
Who manages climate-related risks
and opportunities
|
- The ESG
Committee supports the development and delivery of our ESG
strategy, key policies and material commitments by providing
oversight, coordination and management of ESG commitments and
initiatives. It is co-chaired by the Group Chief Sustainability
Officer and the Group Chief Financial Officer.
- In 2023,
we enhanced our ESG governance with the establishment of a new
Sustainability Execution Committee, which focuses on defining and
measuring the success of our climate ambition, and developing
commercial opportunities that support it through the sustainability
execution programme.
- The Group
Chief Risk and Compliance Officer is the senior manager responsible
for the management of climate risk under the UK Senior Managers
Regime, which involves holding overall accountability for the
Group's climate risk programme.
|
Page
222
Page
88
Page
222
|
How management reports to the
Board
|
- The Board
delegates day-to-day management of the business and implementation
of strategy to the Group Chief Executive. The Group Chief Executive
is supported in his management of the Group by recommendations and
advice from the Group Executive Committee, an executive forum
comprising members of senior management that include chief
executive officers of the global businesses, regional chief
executive officers and functional heads.
- The Group
Executive Committee further enhanced its governance model of ESG
matters with the introduction of a new Sustainability Execution
Committee and supporting forums. These support senior management in
the operationalisation of the Group's sustainability strategy,
through the oversight of the sustainability execution
programme.
|
Page
250
Page
254
|
Processes used to inform
management
|
- The Group
Risk Management Meeting oversees the enterprise-wide management of
all risks, including updates relating to the Group's climate risk
profile and risk appetite, top and emerging climate risks, and key
climate initiatives.
- The
Environmental Risk Oversight Forum oversees global risk activities
relating to environmental risk management, including the transition
and physical risks from climate change. Equivalent forums have been
established at regional level, where appropriate.
|
Page
88
Page
88
|
Strategy
|
|
|
a)
Describe the climate-related risks and opportunities the
organisation has identified over the short, medium and long
term (Companies Act 2006 - Sections 414CA and 414CB 2A
(d))
|
Processes used to determine material
risks and opportunities
|
- To
support the requirements for assessing the impacts of climate
change, we continue to develop a set of capabilities to execute
climate stress testing and scenario analysis. These are used to
improve our understanding of our risk exposures for risk management
and business decision making.
- We also
develop and use climate scenario analysis to gain insights on the
long-term effects of transition and physical risks across our
wholesale and retail banking portfolios.
- Our
sustainable finance and investment ambition aims to help promote
green, sustainable and socially-focused business and sustainable
investment products and solutions.
|
Page
37
Page
65
Page
50
|
Relevant short-, medium-, and
long-term time horizons
|
- We have
continued to take steps to implement our climate ambition to become
net zero in our operations and our supply chain by 2030, and align
our financed emissions to net zero by 2050.
- In
2023, we continued to provide sustainable financing and investment
to our customers in line with our ambition to provide and
facilitate $750bn to $1tn by 2030.
- Our
assessment of climate risks covers three distinct time periods,
comprising: short term, which is up to 2025; medium term, which is
between 2026 and 2035; and long term, which is between 2036 and
2050. These time periods are aligned to the Climate Action 100+
framework v1.2.
|
Page
42
Page
44
Page
141
|
Transition or physical
climate-related issues identified
|
- We aim to
help our customers transition to net zero and a sustainable future
by providing and facilitating between $750bn and $1tn of
sustainable finance and investment by 2030. Our sustainable finance data dictionary includes a detailed
definition of contributing activities.
- For
transition risk, we have metrics in place to monitor the exposure
of our wholesale corporate lending portfolio to six high transition
risk sectors. As at 31 December 2023, the overall exposure to six
high transition risk sectors was $112bn.
Our relationship managers engage with our key wholesale customers
through a transition engagement questionnaire (formerly the
transition and physical risk questionnaire) to gather information
and assess the alignment of our wholesale customers' business
models to net zero and their exposure to physical and transition
risks. We use the responses to the questionnaire to create a
climate risk score for our key wholesale customers.
- We
measure the impacts of climate and weather events to our buildings
on an ongoing basis using historical, current and scenario modelled
forecast data. In 2023, there were 27 major storms that had a minor
impact on five premises with no impact on the availability of our
buildings.
|
Page
50
Page
223
Page
229
|
Risks and opportunities by sector
and/or geography
|
- For
transition risk, we have metrics in place to monitor the exposure
of our wholesale corporate lending portfolio to six high transition
risk sectors. These are automotive, chemicals, construction and
building materials, metals and mining, oil and gas, and power and
utilities.
- Within
our mortgage portfolios, properties or areas with potentially
heightened physical risk are identified and assessed locally, and
potential exposure is monitored through quarterly metrics. We have
also set risk appetite metrics for physical risk in our largest
mortgage markets, the UK and Hong Kong, as well as those with local
regulatory requirements, including Singapore.
- We aim to
help our customers transition to net zero and a sustainable future
by providing and facilitating between $750bn and $1tn of
sustainable finance and investment by 2030. For a detailed breakdown of our sustainable finance progress,
see the ESG Data
Pack.
|
Page
223
Page
224
Page
50
|
Concentrations of credit exposure to
carbon-related assets (supplemental guidance for banks)
|
- We report
our exposure to the six high transition risk sectors in the
wholesale portfolio. For details, see the ESG Data Pack.
- The UK is
our largest mortgage market, which at September 2023 made up 40.0%
of our global mortgage portfolio. We estimate that 0.2% of our UK retail mortgage portfolio is at very
high risk of flooding and 3.5% is at high
risk. This is based on approximately 94.2%
climate risk data coverage by value of our UK portfolio as at
September 2023.
|
Page
223
Page
224
|
Climate-related risks (transition
and physical) in lending and other financial intermediary business
activities (supplemental guidance for banks)
|
- Our
material exposure to climate risk relates to wholesale and retail
client financing activity within our banking portfolio.
- We are
also exposed to climate risk in relation to asset ownership by our
insurance business and employee pension plans.
- HSBC
Asset Management recognises that climate risk may manifest as
transition and physical risks over the short, medium and long term.
The impact of climate-related risk will vary depending on
characteristics such as asset class, sector, business model and
geography. Where applicable and relevant, HSBC Asset Management
incorporates climate-related indicators, such as carbon intensity
and management of carbon emissions, into investment decisions as
well as insights from its climate-related
engagement.
- In
climate scenario analysis on page 227, we
show the relative size of exposures at default in
2023 and the increase in cumulative ECL under each scenario
compared with a counterfactual scenario by 2035 (expressed as a
multiple).
|
Page
65
Page
65
Page
65
Page
227
|
b)
Describe the impact of climate-related risks and opportunities on
the organisation's businesses, strategy and financial planning
(Companies Act 2006 - Sections 414CA and 414CB 2A
(e))
|
Impact on strategy, business, and
financial planning
|
- Our net
zero ambition represents one of our four strategic pillars.
We aim to achieve net zero in our financed
emissions by 2050, and in our own operations and supply chain by
2030.
- Scenario
analysis supports our strategy by assessing our potential exposures
to risks and vulnerabilities under a range of climate scenarios. It
helps to build our awareness of climate change, plan for the future
and meet our growing regulatory requirements. Developments in climate science, data, methodology and
scenario analysis techniques will help us shape our approach
further. We therefore expect this view to change over
time.
- We
continue to enhance our climate scenario analysis exercises so that
we can have a more comprehensive understanding of climate
headwinds, risks and opportunities to support our strategic
planning and actions.
- We have
used climate scenarios to inform our organisation's business,
strategy and financial planning. In 2023, we continued to
incorporate certain aspects of sustainable finance and financed
emissions within our financial planning process.
- We
do not fully disclose impacts from climate-related opportunities on
financial planning and performance including on revenue, costs and
the balance sheet, quantitative scenario analysis, detailed climate
risk exposures for all sectors and geographies or physical risk
metrics. This is due to transitional challenges in relation to data
limitations, although nascent work is ongoing in these areas. We
expect these data limitations to be addressed in the medium term as
more reliable data becomes available and technology solutions are
implemented.
|
Page
44
Page
225
Page
225
Page
222
Page
440
|
Impact on products and
services
|
- We aim to
help our customers transition to net zero and a sustainable future
by providing and facilitating between $750bn and $1tn of
sustainable finance and investment by 2030.
|
Page
50
|
Impact on supply chain and/or value
chain
|
- We will
continue to engage with our supply chain through CDP, and through
direct discussions with our suppliers on how they can further
support our transition to net zero.
- We
recognise that collective action is critical to achieve net zero.
We seek to collaborate with a range of partners to develop a
supportive environment for achieving net zero and mobilising
finance for climate action and nature-based solutions. Our
partnerships vary in scope and form depending on the sector and
geography, as well as our presence in local markets.
- HSBC Asset
Management engages with investee companies on a priority list as
defined in its Global Stewardship Plan, and votes at company
general meetings, including on the topic of climate
change.
|
Page
63
Page
68
Page
65
|
Impact on adaptation and mitigation
activities
|
- In
October 2020, we announced our ambition to reduce our energy
consumption by 50% by 2030, against a 2019
baseline. As part of our
ambition to achieve 100% renewable electricity across our
operations by 2030, we continue to look for opportunities to
procure green electricity in each of our markets. In 2023, our
fourth UK renewable PPA went live in
Sorbie, Scotland. A key challenge remains
the limited opportunity to pursue PPAs or green tariffs in key
markets due to regulations.
- We
regularly review and enhance our building selection process and
global engineering standards and will continue to assess historical
claims data to help ensure our building selection and design
standards address the potential impacts of climate
change.
|
Page
63
Page
229
|
Impact on operations
|
- We have
three elements to our strategy: reduce, replace and remove. We plan
to first focus on reducing carbon emissions from consumption, and
then replacing remaining emissions with low-carbon alternatives in
line with the Paris Agreement. We plan to
remove the remaining emissions that cannot be reduced or replaced
by procuring, in accordance with prevailing regulatory
requirements, high-quality offsets at a later stage.
- We use
stress testing to evaluate the potential for impact on our owned or
leased premises. Our scenario stress test, conducted in 2023,
analysed how eight climate change-related hazards could impact
1,000 of our critical and important buildings. These hazards were
coastal inundation, extreme heat, extreme winds, wildfires,
riverine flooding, pluvial flooding, soil movement due to drought,
and surface water flooding.
|
Page
63
Page
229
|
Impact on investment in research and
development
|
- Throughout 2023, we published regular ESG and
sustainability-related market insights and updates such as
#WhyESGMatters and Learning about ESG to help clients better
understand the implications for their investments.
- We
recognise the need to find new solutions and increase the pace of
change for the world to achieve the Paris Agreement goal of being
net zero by 2050. We are working with a
range of partners to accelerate investment in sustainable
infrastructure, natural resources and climate technology to help
reduce emissions and address climate change.
|
Page
51
Page
52
|
Impact on acquisitions or
divestments
|
- We have
updated our merger and acquisition process to consider potential
climate and sustainability-related targets, net zero transition
plans and climate strategy, and how this relates to
HSBC.
|
Page
222
|
Impact on access to
capital
|
- We have
considered the impact of climate-related issues on our businesses,
strategy and financial planning. Our access to capital may be
impacted by reputational concerns as a result of climate action or
inaction. In addition, if we are perceived to mislead stakeholders
on our business activities or if we fail to achieve our stated net
zero ambitions, we could face reputational damage, impacting our
revenue-generating ability and potentially our access to capital
markets. We expect to further enhance the disclosure in the medium
term as more data becomes available. To
manage these risks we have integrated climate risk into our
existing risk taxonomy, and incorporated it within the risk
management framework through the policies and controls for the
existing risks where appropriate.
|
Page
440
|
Transition plan to a low-carbon
economy
|
- We
published our Group-wide net zero transition plan in January 2024.
In this plan, we provided an overview of our approach to net zero
and the actions we are taking to help meet our ambitions. We want
to be clear about our approach, the change underway today and what
we plan to do in the future. We also want to be transparent about
where there are still unresolved issues and uncertainties. We are
still developing our disclosures, including considerations of
possible additional data in relation to our financial plans,
budgets, and related financial approach for the implementation of
the transition plan in the medium term (e.g. amount of capital and
other expenditures supporting our decarbonisation strategy).
The UK Transition
Plan Taskforce published its final transition plan disclosure
framework in October 2023. We will continue to evolve our
transition plan disclosures to take into account new and
evolving regulatory developments.
|
Page
440
|
Recommendation
|
Response
|
Disclosure location
|
c)
Describe the resilience of the organisation's strategy, taking into
consideration different climate-related scenarios, including a 2°C
or lower scenario (Companies Act 2006 - Sections 414CA and
414CB 2A (f))
|
Embedding climate into scenario
analysis
|
- Scenario
analysis supports our strategy by assessing our potential exposures
to risks and vulnerabilities under a range of climate scenarios. It
helps to build our awareness of climate change, plan for the future
and meet our growing regulatory requirements.
- In our
2023 climate scenario analysis exercises, we explored five
scenarios that were created to examine the potential impacts from
climate change for the Group and its entities.
|
Page
225
Page
225
|
Key drivers of performance and how
these have been taken into account
|
- Climate
scenario analysis allows us to model how different potential
climate pathways may affect and impact the resilience of our
customers and our portfolios, particularly in respect of credit
losses. Under the Current Commitments scenario, we expect lower
levels of losses relating to transition risks, although we would
expect an increase in the effects of climate-related physical risks
over the longer term.
- Scenario
analysis results have been used to support the Group's ICAAP. This
is an internal assessment of the capital the Group needs to hold to
meet the risks identified on a current and projected basis,
including climate risk.
- In
addition, scenario analysis informs our risk appetite statement
metrics. As an example, it supports the calibration of physical
risk metrics for our retail mortgage portfolios and it is used to
consider climate impact in our IFRS 9 assessment.
|
Page
227
Page
229
Page
229
|
Scenarios used and how they factored
in government policies
|
- Our
scenarios are: the Net Zero scenario, the Current Commitments
scenario, the Delayed Transition Risk scenario, the Downside
Physical Risk scenario and the Near Term scenario.
- Our
scenarios reflect different levels of physical and transition risks
over a variety of time periods. The scenario assumptions include
varying levels of governmental climate policy changes,
macroeconomic factors and technological developments. However,
these scenarios rely on the development of technologies that are
still unproven, such as global hydrogen production to decarbonise
aviation and shipping.
|
Page
225
Page
225
|
How our strategies may change and
adapt
|
- The
nature of the scenarios, our developing capabilities, and
limitations of the analysis lead to outcomes that are indicative of
climate change headwinds, although they are not a direct
forecast.
- Developments in climate science, data, methodology and
scenario analysis techniques will help us shape our approach
further. We therefore expect this view to change over
time.
- Climate
scenario analysis plays a crucial role helping us to identify and
understand the impact of climate-related risks and potential
opportunities as we navigate the transition to net zero.
- Our
target-setting approach to date, for on-balance sheet financed
emissions and facilitated emissions, has been to utilise a single
net zero reference scenario (IEA NZE 2021) to underpin both energy
supply-related sectors (oil and gas, power and utilities, and
thermal coal mining) and our published targets for demand-side
sectors in transport and heavy industry.
- We
recognise that the so-called 'hard-to-abate' sectors, such as
cement, iron, steel and aluminium, and aviation have a large
dependence on nascent technologies and the presence (or not) of
enabling policies and regulations. We may consider tracking
progress relative to 1.5°C-aligned ambition ranges for these
sectors in the future, which could include industry-specific
scenarios alongside the IEA NZE scenario.
- We do not
currently fully disclose the impacts of transition and physical
risk quantitatively, due to transitional challenges including data
limitations and evolving science and methodologies. In 2023, we
have disclosed the impairment impacts for our wholesale, retail and
commercial real estate portfolios in different climate scenarios.
In addition, we have disclosed losses on our retail mortgage book
under three scenarios and flood depths for specific markets. For
our wholesale book, we have disclosed potential implications on our
expected credit losses for 11 sectors under two scenarios. We have
also disclosed a heat map showing how we expect the risks to evolve
over time.
|
Page
225
Page
225
Page
229
Page
53
Page
48
Page
440
|
Risk management
|
|
|
a)
Describe the organisation's processes for identifying and assessing
climate-related risks (Companies Act 2006 - Sections 414CA and
414CB 2A (b))
|
Process
|
- We
continue to integrate climate risk into policies, processes and
controls across many areas of our organisation, and we will
continue to update these as our climate risk management
capabilities mature over time.
- We updated
our climate risk management approach to incorporate net zero
alignment risk and developed guidance on how climate risk should be
managed for non-financial risk types. While we have made progress in
enhancing our climate risk framework, further work remains. This
includes the need to develop additional metrics and tools to
measure our exposure to climate-related risks, and to incorporate
these tools within decision making.
- In 2023,
we enhanced our internal climate scenario analysis exercise by
focusing our efforts on generating more granular insights for key
sectors and regions to support core decision-making processes, and
to respond to our regulatory requirements. In climate scenario analysis, we consider, jointly, both
physical risks and transition risks.
- We
continue to review policy implementation as we apply our policies
in practice, and our operationalisation of such policies continues
to be enhanced. We take a risk-based
approach when identifying transactions and clients to which our
energy and thermal coal phase-out policies apply, and when
reporting on relevant exposures, adopting approaches proportionate
to risk and materiality.
|
Page
222
Page
222
Page
225
Page
66
|
Integration into policies and
procedures
|
- We
continue to integrate climate risk into policies, processes and
controls across many areas of our organisation, and we will
continue to update these as our climate risk management
capabilities mature over time.
|
Page
222
|
Consider climate-related risks in
traditional banking industry risk categories (supplementary
guidance for banks)
|
- We provide further details of how we have embedded the management of
climate risk across key risk types, including wholesale
credit risk, retail credit risk, treasury risk, traded risk,
reputational risk, regulatory compliance risk, resilience risk,
model risk, and financial reporting risk.
|
Page
223
|
b)
Describe the organisation's processes for managing climate-related
risks (Companies Act 2006 - Sections 414CA and 414CB 2A
(b))
|
Process and how we make
decisions
|
- The Group
Risk Management Meeting and the Group Risk Committee receive
regular updates on our climate risk profile and progress of our
climate risk programme.
- The
Environmental Risk Oversight Forum (formerly the Climate Risk
Oversight Forum) oversees risk activities relating to climate and
sustainability risk management, including the transition and
physical risks from climate change. Equivalent forums have been
established at a regional level.
|
Page
222
Page
222
|
c)
Describe how processes for identifying, assessing and managing
climate-related risks are integrated into the organisation's
overall risk management framework (Companies Act 2006 -
Sections 414CA and 414CB 2A (c))
|
How we have aligned and integrated
our approach
|
- Our
climate risk approach is aligned to our Group-wide risk management
framework and three lines of defence model, which sets out how we
identify, assess and manage our risks.
- We are
developing our climate risk capabilities across our businesses, by
prioritising sectors, portfolios and counterparties with the
highest impacts.
- In 2023,
we updated our climate risk materiality assessment, to understand
how climate risk may impact across HSBC's risk taxonomy.
- In
addition to this assessment, we also consider climate risk in our
emerging risk reporting and scenario analysis
|
Page
221
Page
221
Page
221
Page
221
|
How we take into account
interconnections between entities and functions
|
- Our
climate risk approach is aligned to our Group-wide risk management
framework and three lines of defence model, which sets out how we
identify, assess and manage our risks.
- Through
our climate risk programme, we continued to embed climate
considerations throughout the organisation, including through risk
policy updates and the completion of our annual climate risk
materiality assessment. We also developed risk metrics to monitor
and manage exposures, and further enhanced our internal climate
scenario analysis.
- We
continue to make progress in enhancing our climate risk
capabilities, and recognise it is a long-term iterative
process. This includes updating our
approach to reflect how the risks associated with climate change
continue to evolve in the real world, and maturing how we embed
climate risk factors into strategic planning, transactions and
decision making across our businesses.
|
Page
221
Page
139
Page
221
|
Metrics and targets
|
|
a)
Disclose the metrics used by the organisation to assess
climate-related risk and opportunities in line with its strategy
and risk management process (Companies Act 2006 - Sections 414CA
and 414CB 2A (h))
|
Metrics used to assess the impact of
climate-related risks on our loan portfolio
|
- We have
metrics in place to monitor the exposure of our wholesale corporate
lending portfolio to six high transition risk sectors. As at 31
December 2023, the overall exposure to six high transition risk
sectors was $112bn.
- The UK is
our largest mortgage market, which at September 2023 made up 40.0%
of our global mortgage portfolio. We estimate that 0.2% of our UK retail mortgage portfolio is at very
high risk of flooding, and 3.5% is at high
risk. This is based on approximately 94.2%
climate risk data coverage by value of our UK portfolio as at
September 2023.
- In 2023,
we further developed our risk metrics to monitor
our performance against our net zero targets for both financed
emissions and own operations.
|
Page
223
Page
224
Page
222
|
Metrics used to assess progress
against opportunities
|
- We
continue to track our progress against our ambition to provide and
facilitate $750bn to $1tn of sustainable finance and investment by
2030, aligned to our published data dictionary. For a detailed breakdown of our sustainable finance
progress, see the ESG Data
Pack.
- We
do not currently fully disclose the proportion of
revenue or proportion of assets, capital deployment or other
business activities aligned with climate-related opportunities,
including revenue from products and services designed for a
low-carbon economy, forward-looking metrics consistent with our
business or strategic planning time horizons. In relation to
sustainable finance revenue and assets we are disclosing certain
elements. We expect the data and system limitations related to
financial planning and performance, and climate-related
opportunities metrics to be addressed in the medium term as more
reliable data becomes available and technology solutions are
implemented. We expect to further enhance this disclosure in the
medium term.
|
Page
18
Page
440
|
Board or senior management
incentives
|
- To help us
achieve our ESG ambitions, a number of measures are included in the
annual incentive and long-term incentive scorecards of the Group
Chief Executive, Group Chief Financial Officer and Group
Executives.
|
Page
16
|
Internal carbon price
|
- We do not
currently disclose internal carbon prices due to transitional
challenges such as data challenges. But we considered carbon prices
as an input for our climate scenario analysis exercise.
We expect to further enhance this disclosure in
the medium term.
|
Page
440
|
Metrics used to assess the impact of
climate risk on lending and financial intermediary business
(supplemental guidance for banks)
|
- As part
of our 2023 internal climate scenario analysis, we completed a
detailed climate risk assessment for the UK, Hong Kong, mainland
China and Australia, which together represent 75% of the balances
in our global retail mortgage portfolio. Our analysis shows that
over the longer term, we expect minimal losses to materialise when
considering the Current Commitments scenario.
- In
insights from climate scenario analysis on page 227, we showed the relative size of
exposures at default in 2023 and the increase in cumulative ECL
under each scenario compared with a counterfactual scenario by 2035
(expressed as a multiple).
- We do not
fully disclose metrics used to assess the impact of climate-related
physical (chronic) and transitions (policy and legal, technology
and market) risks on retail lending, parts of wholesale lending and
other financial intermediary business activities (specifically
credit exposure, equity and debt holdings, or trading positions,
each broken down by industry, geography, credit quality and average
tenor). We are aiming to develop the
appropriate systems, data and processes to provide these
disclosures in future years. We disclose the exposure to six high
transition risk wholesale sectors and the flood risk exposure and
Energy Performance Certificate breakdown for the UK
portfolio.
|
Page
228
Page
227
Page
440
|
b)
Disclose scope 1, scope 2 and, if appropriate, scope 3 greenhouse
gas emissions and the related risks (Companies Act 2006 - Sections
414CA and 414CB 2A (h))
|
Our own operations
|
- We report
greenhouse gas emissions resulting from the energy used in our
buildings and employees' business travel. In 2023, we also continue to disclose our scope 3 (category 1
and category 2) supply chain emissions. Our
initial supply chain emission figures may require updating as data
availability changes over time and methodologies and climate
science evolve.
|
Page
64
|
Greenhouse gas emissions for lending
and financial intermediary business (supplemental guidance for
banks)
|
- Our
analysis of financed emissions comprises 'on-balance sheet financed
emissions' and 'facilitated emissions'.
Our on-balance sheet financed emissions include
emissions related to on-balance sheet lending, such as project
finance and direct lending. Our facilitated emissions include
emissions related to financing we help clients to raise through
capital markets activities.
- Work
continues on the integration of ESG and climate analysis into HSBC
Asset Management's actively managed product offerings to help
ensure the climate risks faced by companies are considered when
making investment decisions and to assess ESG risks and
opportunities that could impact investment performance.
- We
currently disclose four out of 15 categories of
scope 3 greenhouse gas emissions including business travel, supply
chain and financed emissions. In relation to financed emissions, we
publish on-balance sheet financed emissions for a number of sectors
as detailed on page 18. We also publish facilitated emissions for the oil and gas,
and power and utilities sectors. Future disclosures on financed
emissions and related risks are reliant on our customers publicly
disclosing their greenhouse gas emissions, targets and plans, and
related risks. We recognise the need to provide early transparency
on climate disclosures but balance this with the recognition that
existing data and reporting processes require significant
enhancements.
|
Page
53
Page
65
Page
440
|
c)
Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance against
targets (Companies Act 2006 - Sections 414CA and 414CB 2A
(g))
|
Details of targets set and whether
they are absolute or intensity based
|
- We
continue to track our progress against our ambition to provide and
facilitate $750bn to $1tn of sustainable finance and investment by
2030, aligned to our published data dictionary.
- We have
continued to take steps to implement our climate ambition to become
net zero in our operations and our supply chain by 2030, and align
our financed emissions to net zero by 2050.
- For
financed emissions we do not plan to set 2025 targets. We set
targets in line with the Net-Zero Banking Alliance ('NZBA')
guidelines by setting 2030 targets. While the NZBA defines 2030 as
intermediate, we use different time horizons for climate risk
management. For climate, we define short term as time periods up to
2025; medium term is between 2026 and 2035; and long term is
between 2036 and 2050. These time periods align to the Climate
Action 100+ disclosure framework. In 2023, we disclosed interim
2030 targets for financed emissions for a number of sectors as we
outline on page 18.
- We do not
currently disclose a target for capital deployment. In relation to
capital deployment, since 2015, we have issued more than $2bn of
our own green bonds and structured green bonds with the capital
invested into a variety of green projects, including: green
buildings, renewable energy and clean transportation projects. In
2023, we further progressed our internal review and enhancement of
the green bond framework, with further refinement including
internal and external review to be undertaken in 2024. This will be
subject to continuous review and monitoring to ensure that they
remain up to date and reflect updated standards, taxonomies and
best practices. Any such developments in standards, taxonomies and
best practices over time could result in revisions in our reporting
going forward and lead to differences year-on-year as compared to
prior years. See the HSBC Green Bond Report for further
information.
- We do not
currently disclose internal carbon pricing target due to
transitional challenges such as developing the appropriate systems
and processes, but we considered carbon prices as an input for our
climate scenario analysis exercise. We expect to further enhance
the disclosure in the medium term as more data becomes
available.
- We do not
currently disclose targets used to measure and manage physical
risk. This is due to transitional challenges including data
limitations of physical risk metrics. For retail, we do not use
targets to measure and manage physical risk. In 2023 we introduced
internally a global 'soft trigger' monitoring and review process
for physical risk exposure where a market reaches or exceeds a set
threshold, as this ensures markets are actively considering their
balance sheet risk exposure to peril events. We also consider
physical and transition risk as an input for our climate scenario
analysis exercise. We expect to further
enhance our disclosures as our data, quantitative scenario
analysis, risk metrics and physical risk targets evolve, and
technology solutions are implemented in the medium term.
- We have
described the targets used by the organisation to manage
climate-related risks and opportunities and performance against
targets. However, taking into account the nature of our business,
we do not consider water usage to be a material target for our
business and, therefore, we have not included a target in this
year's disclosure.
|
Page
18
Page
42
Page
17
Page
440
Page
440
Page
440
Page
440
|
Other key performance indicators
used
|
- In
October 2020, we announced our ambition to reduce our energy
consumption by 50% by 2030, against a 2019 baseline, and in 2023 we
achieved 26.3%.
- As part
of our ambition to achieve 100% renewable electricity across our
operations by 2030, we continue to look for opportunities to
procure green electricity in each of our markets. In 2023, our
fourth UK renewable PPA went live in Sorbie, Scotland.
|
Page
63
Page
63
|
Social
Building inclusion and
resilience
We play an active role in opening up
a world of opportunity for our customers, colleagues and
communities by connecting across our international networks to help
build a more inclusive and resilient society.
Inclusion is key to opening up a
world of opportunity. It involves a commitment to identifying and
addressing barriers that may stop people from accessing
opportunities because of who they are or where they are
from.
Inclusion goes hand in hand with
resilience. We aim to help people build the capabilities they need
to achieve their goals and to deal with the challenges they face,
so we are focused on delivering products, services and education
that support our colleagues, customers and communities.
Colleagues
We believe that an inclusive,
healthy and rewarding workplace helps the whole Group succeed. We
are focused on recruiting and retaining diverse talent by offering
fair pay and career progression so we can ensure our colleagues -
and particularly our leadership - are representative of the
communities we serve. We do this by setting meaningful goals and
tracking and monitoring our progress. In 2023, we continued to make
progress against all of our goals, although the progress we are
making with women in senior leadership roles has not been as fast
paced as we would like.
Employee well-being is essential. We
offer all colleagues a wide range of resources that help support
their mental, physical and financial well-being so they can thrive
in and out of work. We are working to ensure that our offices,
branches and digital spaces are accessible and safe for
all.
We also help our colleagues build
resilience by ensuring that they are equipped with the skills and
knowledge they need to progress their careers during a period of
significant economic transformation.
Customers
We are committed to helping our
customers access the financial services they need. They should not
find it more difficult to access finance because of their gender,
their ethnicity, their sexual orientation, their neurodiversity or
their disability. Our ambition is to create a welcoming,
inclusive and accessible banking experience for all our
customers.
We build resilience by creating
products and services that simplify the banking experience, so
customers can manage and grow their wealth more easily. We also
help protect what people value most - their health, families, homes
and belongings. We also build resilience by providing education so
customers can understand how to manage their finances more
effectively.
Communities
We are developing an updated global
philanthropy strategy that allows us to work alongside the
communities we operate within, and which aligns with our ESG areas
of focus - 'transition to net zero' and 'building inclusion and
resilience'.
We believe that fostering inclusion
and building resilience helps us to create long-term value and
growth. By removing unnecessary barriers and striving to be a fair
and equitable organisation, we can attract and retain the best
talent, support a wider customer base to achieve their goals and
stimulate growth in our communities. This is how we open up a world
of opportunity for our colleagues, our customers and our
communities.
In
this section
|
|
|
|
Promoting diversity and fostering inclusion
|
Our
approach to diversity and inclusion
|
We value diversity of thought and we
are building an inclusive
environment that reflects our
customers and communities.
|
Page
76
Page 77
Page 78
|
Creating a diverse environment
|
Fostering an inclusive culture
|
Building a healthy workplace
|
Listening to our colleagues
|
We run a Snapshot survey and report
insights to our Group Executive Committee and the Board.
|
Page
79
|
Being a great place to work
|
We aim to create a great workplace
that will help in attracting, retaining and motivating our
colleagues so they can deliver for our customers across countries
and territories.
|
Page
81
|
Developing skills, careers and
opportunities
|
Learning and skills development
|
We aim to build a dynamic, inclusive
culture where colleagues can develop skills and experiences that
help them fulfil their potential.
|
Page
83
|
Energising our colleagues for growth
|
We are committed to offering
colleagues the chance to develop their skills while building
pipelines of talented colleagues to support the achievement of our
strategic priorities.
|
Page
84
|
Building customer inclusion and resilience
|
Our
approach to customer inclusion and resilience
|
We aim to support financial
well-being and remove barriers people can face in accessing
financial services.
|
Page
85
|
Engaging with our communities
|
Building a more inclusive and resilient
world
|
We focus on a number of priorities
where we can make a difference to the community and support
sustainable growth.
|
Page
86
|
Promoting diversity and fostering inclusion
Our approach to diversity and
inclusion
Our purpose, 'Opening up a world of
opportunity', explains why we exist as an organisation, and is the
foundation of our diversity and inclusion strategy. Inclusion is an
enabler for our 'energise' strategic pillar, and is embedded in the
values of our organisation. By valuing difference and seeking
different perspectives, we can more accurately reflect the
societies we serve, creating better outcomes for customers and
colleagues.
Our data-driven strategy enables us
to set aspirational goals to track and monitor our progress. We
remain focused on specific Group-wide priorities for which we hold
senior executives accountable. Some executives also have local
priorities, which ensures our diversity and inclusion agenda
remains locally relevant.
|
How we hold ourselves to
account
|
|
|
|
|
We
set meaningful goals
Our executive Directors and Group
Executives are accountable for progressing our agenda through a
series of diversity and inclusion aspirational goals that align to
three public commitments that we have made. In 2023, we continued
to make progress against our three goals by:
- achieving
a 34.1% representation of women in senior
leadership roles, with a goal of achieving 35% by 2025;
- attaining
a 3.0% representation of Black heritage colleagues in senior
leadership in the UK and US combined, against a goal to achieve
3.4% by 2025; and
- increasing our Inclusion index as measured in our Snapshot
survey, to 78% against a 2023 target of 75%.
|
|
We
report and track progress
Measuring our performance ensures we
consistently and accurately monitor the progress made against our
aspirational goals. Our data-backed approach tracks this
through:
- an
inclusion dashboard, which monitors progress against goals with
trend data on hiring, promotion and exit ratios, is reported to the
Group Executive Committee on a quarterly basis; and
- semi-annual review meetings where our Head of Inclusion meets
each Group Executive to review data, their progress against their
aspirational goals, and to support further progress.
|
|
We
benchmark our performance
External disclosures and benchmarks
allow us to measure the progress that we are making and identify
opportunities for future prioritisation. In 2023, we:
- scored
87.2% in the Bloomberg Gender-Equality Index measuring our
gender-related data transparency and performance;
- maintained our Stonewall Gold standard and rank as a top
global LGBTQ+ inclusion employer; and
- ranked as
a Top 75 employer in the UK Social Mobility Index in our first year
of entering a submission.
|
|
|
|
|
|
|
|
|
|
A
data-driven approach to inclusion
We are evolving our data-driven
approach by enabling more of our colleagues to self-identify across
a range of data points. This data has enabled us to set locally
relevant priorities and identify areas of our organisation where we
need to focus our attention. We invite colleagues to self-identify
on a broad range of data points where we can, although given the
international nature of our business, there are some jurisdictions
where we are unable to invite colleagues to share their diversity
data with us. We have enabled 91% of our colleagues to disclose
their ethnic background, with 62% of colleagues choosing to do so,
where this is legally permissible.
Our approach goes beyond ethnic
heritage and considers broader representation within the workplace.
We have enabled 90% of the workforce to share whether they have a
disability, 71% of our workforce to share their sexual orientation,
and all UK-based colleagues to share their socio-economic
background.
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Our approach to Asian heritage
representation
Our roots as an organisation trace
back over 150 years to Hong Kong, where HSBC opened its doors to
serve clients with international needs. Asia remains a strategic
focus for us today.
To better reflect the communities we
serve, we have a focus on increasing representation across our
global workforce, including Asian heritage representation. Defining
Asian heritage can be complex due to the vast range of ethnicities
and identities across the region. In 2023, 37.8% of our senior
leaders were able to self-identify as being from an Asian heritage
background. To deliver our international strategy it is vital that
we are both representative of our local communities, and able to
mobilise leaders with global perspective and diverse heritage
backgrounds across our international network.
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Creating a diverse
environment
Women in senior leadership
Since achieving our ambition of
having 30% of senior leadership positions held by women in 2020, we
set a new goal to reach 35% by 2025. We remain on track, with
34.1% of senior leadership roles held by
women at the end of 2023, excluding our Canada business, which is
planned for sale in 2024. Progress in the past year has not been as
fast paced as we would like. A total of 37.7% of all external
appointments into senior positions were female, compared with 35.7%
in 2022, and women represented 39.6% of all promotions into senior
leadership roles in 2023.
Development programmes, including
our Accelerating Female Leaders initiative, have helped to increase
the visibility, sponsorship and network of our high performing,
senior women. Since the start of the programme in 2017, 24% of
participants have been promoted and 2% have taken a lateral move to
develop their careers. We have also retained over 79% of colleagues
who completed the programme.
In our 2023 Accelerating into
Leadership programme, which prepares high potential, mid-level
colleagues for leadership roles, 43% of participants were women.
More than 5,200 women also participated in our Coaching Circles
programme, which matches senior leaders with a small group of
colleagues to provide advice and support on the development of
leadership skills and network building.
Our succession planning for key
leadership roles includes an assessment of the diversity of our
succession plans. We are improving the gender diversity of those
roles critical to our organisation and the successors to those
roles. In 2023, 40% of the succession pool for these roles were
women, compared with 36% in 2022.
Black colleagues in senior leadership
We remain on track to double the
number of Black colleagues in senior leadership roles globally by
2025, having increased the number of Black senior leaders by 62%
since 2020.
In 2022, we set a new Group-wide
ethnicity strategy, which is overseen by a senior working group and
led by our Group Chief Risk and Compliance Officer. The aim of the
strategy is to ensure we accurately reflect the communities we
serve and the societies in which we operate. We continue to
identify challenges colleagues from diverse backgrounds face in
achieving their aspirations at HSBC.
We have continued to focus on the
development of Black heritage colleagues through the delivery of
dedicated development programmes. Using data analytics, we have
identified that in the UK, Black heritage female colleagues are
less likely to hold positions as people managers. To address this,
we introduced the Solaris programme to provide coaching and
development for our UK-based Black heritage female colleagues.
Forty women have successfully completed the programme and 29% have
been promoted.
We also partnered with Vivida, a
virtual reality firm, to launch an immersive learning programme
designed to bring to life the experiences of Black heritage and
ethnic minority colleagues, highlighting the pressures, barriers
and biases faced by these communities. The programme has been
completed by 11,900 colleagues, and was nominated for awards at the
2023 European Diversity Awards and as finalists at The 2024
Learning Awards.
In 2023 EmpowHER was launched, a
programme created by Black heritage women for Black heritage women
at mid-management levels across the UK business. The programme
encourages participants to support each other with the tools and
shared experiences to structure their careers, expand their network
and seek job opportunities. It also helps to create improved
visibility of talent to senior leadership.
Gender diversity data
1
Combined Group Executives and direct reports includes HSBC Group
Executives and their direct reports (excluding administrative
staff) as of 31 December 2023.
2
Directors (or equivalent) of subsidiary companies that are included
in the Group's consolidated financial statements, excluding
corporate directors.
3
In our leadership structure, we classify senior leadership as those
at career band 3 and above; middle management as those at global
career band 4; and junior management as those at global career
bands 5 and 6.
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Representation and pay gaps
We publish this data annually to
ensure both transparency and a maintained focus on addressing
representation gaps within the organisation. Our gender and
ethnicity pay gap reporting shows the difference in average pay
between two groups of people (regardless of roles or seniority). We
have reported our UK gender representation and pay gap data since
2017 in line with reporting regulations, and have voluntarily
extended this to include the US, mainland China, Hong Kong, India,
Mexico, Singapore and the UAE, alongside ethnicity data for the UK
and US. In 2023, we also included gender pay gap data for Argentina
and Malaysia, covering approximately 80% of our workforce
(excluding our Canada business held for sale). In 2023, our mean
aggregate UK-wide gender pay gap was 43.2%, compared with 45.2% in
2022, and the ethnicity pay gap was 4.5%, compared with 0.4% in
2022. Our UK gender pay gap is driven by several factors including
the shape of our workforce, where there are more men than women in
senior higher-paid roles, and more women than men in junior roles.
While we are confident in our approach to pay equity, until women
and ethnic minority colleagues are proportionately represented
across all areas and levels of the organisation we will continue to
see gaps in average pay. We are committed to paying colleagues
fairly regardless of their gender or ethnicity and have processes
to ensure that remuneration is free from bias. We review our pay
practices and undertake a pay equity review annually, including a
regular independent third-party review of equal pay in major
markets. If pay differences are identified that are not due to
objective, tangible reasons such as performance, skills or
experience, we make adjustments.
For further details of our
representation data, pay gap data, and actions, see
www.hsbc.com/diversitycommitments and the ESG Data Pack at
www.hsbc.com/esg.
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Fostering an inclusive
culture
Our inclusion strategy seeks to make
HSBC an organisation in which every colleague can feel like they
belong, and are empowered to contribute their perspectives and
ideas. Our strategy sits above a range of diversity and inclusion
strands from gender, ethnicity and faith to disability and
socio-economic background - we want to ensure that all colleagues
are able to realise their full potential.
We use the Inclusion index in our
annual Snapshot survey to measure the extent to which our
colleagues feel a sense of belonging and psychological safety
within the organisation, alongside their perception of fairness and
trust. In 2023, we achieved a score of 78%, which is three percentage points ahead of our
annual aspirational goal, and two percentage points ahead of the
financial services industry benchmark.
Analysis of our Inclusion index
allows us to measure engagement levels of specific colleague groups
in greater detail, in particular different diversity strands, to
better understand the experiences of our colleagues globally. We
found that scores from colleagues who identify as male and female
were broadly in line with the overall Group-wide result, at 79% and
77% respectively. From an ethnicity perspective, our Black heritage
colleagues were four percentage points below the Group-wide
average, while our Asian heritage colleagues' results were on a par
with the overall score, at 78%.
Our
employee resource groups
Our employee resource groups
('ERGs') foster an inclusive culture and contribute significantly
to the experience of tens of thousands of colleagues. They operate
globally and are led by colleagues with a range of shared values,
identities, interests and goals, including disability, LGBTQ+,
ethnicity, faith and gender.
Each of our non-executive Directors
and most Group Executives are aligned with one of our global ERGs,
ensuring there is a direct link between senior leadership and our
colleagues. The non-executive Director dedicated to workforce
engagement is closely aligned to our diversity and inclusion
strategy and has attended events such as our 2023 Global ERG
Summit.
In 2023, our ERGs led numerous
initiatives and events, including the Ability network hosting a
global summit aimed at driving cultural change to build confidence
for colleagues with a disability. Our Nurture ERG, which supports
working parents and carers, launched the #LeaveLoudly Campaign
globally. Its aim is to drive engagement by counteracting
'presenteeism', acknowledging that everyone has multifaceted lives,
and to show that leaders across HSBC support a healthy work-life
balance.
Looking to the future on disability
Enhancing the experience of our
employees, particularly those with disabilities, is a vital part of
our commitment to build an inclusive organisation. A key initiative
has been a targeted career development programme to empower
colleagues with confidence to drive their careers
forward.
Recognising the pivotal role of line
managers, we have introduced a learning plan through our Degreed
platform to help managers support team members with physical,
sensory, long-term, and mental health conditions, as well as those
who identify as neurodiverse. Our Ability ERG has hosted support
sessions globally, where colleagues shared their experiences and
raised awareness for disability inclusion, and the support provided
by HSBC.
In collaboration with PurpleSpace,
the disability network and professional development hub, we
sponsored and published a Leadership Model resource for employee
groups. In 2023, we also sponsored the UK Business Disability
Forum's roundtable and conference. We have enhanced the support we
provide to colleagues through our workplace adjustment programme
partnering with Microlink, extending the availability of this
service to almost 37,790 colleagues in our global service centres
and technology centres in India.
UK
socio-economic diversity
We believe that no-one should be
limited by their socio-economic background and are committed to
driving socio-economic inclusion within our workforce.
In 2022, we began exploring the
impact socio-economic background has on our colleagues, working
with them, and internal and external stakeholders to develop our
understanding on socio-economic diversity.
In 2023, we entered the Social
Mobility Index for the first time and gained recognition as a top
75 employer. Our Strive ERG, sponsored by the Group Chief Human
Resources Officer, now has over 1,000 members. We have continued to
be an active member of Progress Together, focused on helping
members progress and retain a socio-economically diverse workforce,
including taking part in the largest financial services study of
socio-economic diversity.
We launched a career development
programme through the Strive ERG, enabling colleagues from
different backgrounds to lead with impact and build career
confidence.
We continue to improve the
socio-economic diversity data we collect by running campaigns
encouraging our colleagues and job applicants to share their
socio-economic background. In 2023, we extended our socio-economic
focus to Asia, with an initial data collection pilot in Singapore
through our employee engagement survey. We also launched a new
learning plan, available for all employees to better understand
what socio-economic diversity is and why it matters.
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Supporting colleagues experiencing
menopause
Many of our female colleagues will
experience menopause symptoms during their career. We do not want
menopause to be a silent struggle and we have put in place the
right support so it does not need to be. In 2023, we launched a new
global framework centred around three principles of: creating
awareness; removing barriers; and being adaptable. These form the
basis of our menopause toolkit, which is available to all
colleagues, and includes guidance on how to access menopause
support and guidance for line managers on how to best support those
in need.
We recognise that there is much more
we can do to support those who are experiencing menopause and those
who are supporting others experiencing it. Senior sponsorship is
helping to raise awareness and our first step is to provide access
to dedicated resources on menopause.
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Building a healthy workplace
Listening to our
colleagues
Listening to our colleagues is an
essential part of building a healthy workplace at HSBC. We capture
employee feedback in a variety of ways to understand how our
colleagues feel about HSBC and to help us improve the employee
experience.
How
we listen
Our annual Snapshot survey runs
every September and gives all HSBC employees the opportunity to
share their experiences of working at the organisation. Our 2023
survey achieved a record response rate of 85%, up from 78% in 2022,
with nearly 180,000 colleagues choosing to share their
views.
The results of Snapshot are
discussed at all levels. Our record participation has enabled us to
put more data directly in the hands of our people managers, with
more than 11,000 teams able to access their results, while
maintaining the confidentiality of individual employees' responses.
Managers are supported by a guided action planning tool to help
them understand and interpret insights relevant to their team,
while directing them towards support resources for them and their
teams to explore. Results are also shared with executive leadership
teams across the Group, with detailed reporting provided to our
Group People Committee and the Board.
We complement the Snapshot survey
with our annual Performance and Reward survey, which runs every
March. Open to all employees, it captures feedback on our annual
performance and pay review cycle, providing valuable insight into
how well we are meeting our colleagues' needs and expectations on
compensation, development and professional growth.
We also run targeted listening
activities for employees at key moments in their careers, capturing
detailed feedback from new joiners, internal movers and voluntary
leavers.
Employee conduct and harassment
We expect all our employees to treat
each other with respect and dignity, and we do not tolerate or
condone harassment or bullying in any form. We continually strive
to improve awareness and education around such behaviours, and
strengthen our understanding and response to these issues across
all levels of the organisation. In 2023, our overall Snapshot Speak
up index improved slightly to 76%, up one
percentage point from 2022.
We encourage our colleagues to speak
up about poor behaviour or things that do not seem right, and we
have included bullying, harassment, discrimination and retaliation
in our 2023 Global Mandatory Training curriculum. Our Snapshot
survey revealed an increase in colleagues able to state their
opinion without fear of negative consequences, with 72% of colleagues feeling able to do so, up from 70%
in 2022.
In 2023, we launched our global code
of conduct which is supported by our global anti-bullying and
harassment code. This continues to help us to maintain high
standards of conduct across the Group.
We have mandatory procedures, both
globally and locally, for handling and investigating employee
concerns, which include those for bullying and harassment. Cases
are continually monitored from our speak-up channels, and data is
reported to management committees to ensure there is visibility at
leadership level.
In 2023, we had a total of 834
concerns raised relating to bullying, harassment, discrimination
and retaliation. Where the concerns were substantiated following an
investigation, appropriate action was taken, which included
termination of services, where appropriate. In 2023, 38% of
concerns raised were either partly or fully substantiated and 24
colleagues were dismissed in relation to bullying, harassment,
discrimination or retaliation.
We are committed to addressing this
type of behaviour and will continue to take action where we find
that an employee has breached our values and high standards of
conduct.
Employee engagement:
77%
Employee engagement score
(2022: 74%)
81%
Of colleagues who feel confident
about this company's future
(2022: 77%)
85%
Of colleagues who completed our
annual Snapshot survey
(2022: 78%)
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Promoting mental health
awareness
A poll posted by a senior leader on
our intranet revealed that 94% of colleagues said they trust
leadership more when they open up about their own mental
health.
To build on this sentiment, we
celebrated World Mental Health Day by running a global awareness
campaign 'The Big Mental Health Conversation' in October 2023. We
encouraged leaders to post questions on our intranet to gather
feedback from colleagues on their experiences and how we can
improve mental health support. We surveyed our colleagues during
the campaign and half said they were very satisfied with the mental
health support HSBC offers. Supporting the mental health of our
colleagues continues to be a priority, including ensuring that we
continue to signpost how colleagues can access available support.
Throughout 2023, we also held over 200 virtual events, featuring
internal and external experts providing advice on mental health and
topics related to well-being.
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Listening to our colleagues
continued
Employee engagement
We use eight Snapshot indices to
measure key areas of focus and compare against peer institutions.
The table below sets out how we performed.
Index
|
Score1
|
vs
20222
|
HSBC vs
benchmark3
|
Questions that make up the
index
|
Employee engagement
|
77%
|
+3
|
+7
|
I am proud to say I work for this
company.
Right now, I feel motivated by this
organisation to do the best job I can.4
I would recommend this company as a
great place to work.
|
Employee focus
|
76%
|
+4
|
+4
|
I generally look forward to my work
day.
My work gives me a feeling of
personal accomplishment.
My work is challenging and
interesting.
|
Strategy
|
78%
|
+3
|
+5
|
I have a clear understanding of this
company's strategic objectives.
I am seeing the positive impact of
our strategy.
I feel confident about this
company's future.
|
Change leadership
|
76%
|
0
|
+4
|
Leaders in my area set a positive
example.
My line manager does a good job of
communicating reasons behind important changes that are
made.
Senior leaders in my area
communicate openly and honestly about changes to the
business.
|
Speak up
|
76%
|
+1
|
0
|
I believe my views are genuinely
listened to when I share my opinion.5
I feel able to speak up when I see
behaviour which I consider to be wrong.
I can state my opinion without the
fear of negative consequences.6
|
Trust
|
78%
|
+1
|
0
|
I trust my direct
manager.
I trust senior leadership in my
area.
Where I work, people are treated
fairly.
|
Career
|
71%
|
+3
|
+6
|
I feel able to achieve my career
objectives at this company.
I believe that we have fair
processes for moving/promoting people into new roles.
My line manager actively supports my
career development.
|
Inclusion
|
78%
|
+2
|
+2
|
I feel a genuine sense of belonging
to my team.
I feel able to achieve my career
objectives at this company.
I feel able to be myself at
work.
I trust my direct
manager.
Where I work, people are treated
fairly.
I can state my opinion without the
fear of negative consequences.6
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1
Each index comprises constituent questions, with the average of
these questions forming the index score.
2
We revised the questions that comprise some of our indices to
ensure the reliability of external benchmark data. New questions
were trialled in 2022 so comparisons are all reported on a
like-for-like basis; as such, historical comparison figures differ
slightly from those reported last year.
3
We benchmark Snapshot results against a peer group of global
financial services institutions, provided by our research partner,
Ipsos Karian and Box. Scores for each question are calculated as
the percentage of employees who agree to each statement. For
further details of the constituent questions and past
results, see the ESG Data Pack at
www.hsbc.com/esg.
4
Previously: I feel valued at this company.
5
Previously: My company is genuine in its commitment to encourage
colleagues to speak up.
6
Previously: Where I work, people can state their opinion without
fear of negative consequences.
For further details of well-being, see page 82, and for further details of inclusion, see page
76.
What employees told us
Seven of our eight Snapshot indices
improved in 2023, while our change leadership index remained
static. Our headline measure of employee engagement captures how
employees feel about HSBC: whether they are proud to say they work
here, whether they would recommend working at HSBC, and how
motivated they feel to do their best work. Employee engagement
increased by three percentage points compared with 2022, and seven
percentage points above the external financial services benchmark.
Our employee focus index, which measures how employees feel about
their day-to-day work, increased by four percentage points to put
HSBC four points ahead of the industry benchmark.
Analysis of the key drivers of our
engagement scores showed that engaged colleagues are more likely to
feel positive about their career, our strategy and our leadership.
Our free text responses also showed that training and progression
opportunities was the most cited reason for recommending HSBC,
followed by our approach to flexible and hybrid working and the
strength of our management.
Negative comments continued to focus
around pay and benefits but were mentioned less than in 2022. For
further details of our approach to being a great place to work,
including pay transparency, see page 81.
Our Snapshot survey showed that 67%
of employees plan to stay at HSBC for five or more years, a two
percentage point increase since 2022. This aligned with a drop in
voluntary turnover in 2023 to 9.3%, compared with 14.1% in 2022,
and reflects trends in the wider employment market. Results from
our listening channels continued to show that career opportunities
and competitive reward packages remain the two key drivers behind
our ability to attract and retain talented colleagues.
We are committed to building on our
high levels of engagement and feedback throughout 2024.
Being a great place to
work
To deliver our purpose, ambition and
strategy we need the best people, performing at their best.
Creating a great workplace helps us attract, retain and motivate
our colleagues so they can deliver for our customers.
Underpinning this is our reward
strategy, which we updated in 2022 to create an environment where
the best people want to work. Our workforce proposition is rooted
in our purpose and values, and the principles of rewarding
colleagues responsibly, recognising colleagues' success and
supporting our colleagues to grow.
Rewarding colleagues responsibly
We believe in rewarding our
colleagues responsibly, which means ensuring that our pay and
benefits provide financial security for all. Our annual Performance
and Reward survey measures several factors, including how
colleagues feel about our reward proposition. In 2023, seven key
performance indicators related to our year-end review improved by
four or more percentage points, including a nine percentage point
increase in colleagues who feel they are paid fairly for the work
they do.
As part of our commitment to
rewarding colleagues responsibly, we went beyond compliance in
assessing statutory minimum wages, to ensure that all colleagues
are paid at least a living wage.
A living wage should be sufficient
to cover an adequate standard of living considering the cost of
goods and services in each country and territory in which we
operate. In 2023, we worked with the Fair Wage Network, which
provided an independent source of wage levels. As a result, HSBC
achieved accreditation as a global living wage employer in 2024. We
will continue to review our pay levels to ensure that no colleague
falls below a living wage level.
For further details of our approach to colleague
remuneration, see page 290.
Recognising colleagues' success
We are committed to recognising the
achievements of our colleagues' success. Variable pay, which forms
part of total compensation alongside fixed pay, allows us to
recognise the performance and behaviours of our
colleagues.
At the beginning of each year, we
ask colleagues to set goals with support from their line managers
to ensure they are aligned with the overall Group strategy and
business priorities. As a result, 87% of colleagues said they have
a clear understanding of what is expected of them throughout the
year.
We expect our people managers to
hold regular performance and development conversations to review
progress, incorporate feedback and discuss well-being. In 2023, our
Snapshot survey revealed that 81% of colleagues said they had
regular performance conversations with their manager, while 63% had
them at least once a month, up from 57% in 2022. These
conversations also provide an opportunity for colleagues to
regularly revisit any goals set to maintain the right level of
challenge in their day-to-day work.
At year-end, employees are rated on
both performance and behaviour. In our Pay and Benefits survey, 72%
of colleagues said their year-end performance assessment fairly
reflected their performance and 83% agreed that rating decisions
were determined in an unbiased way, regardless of any protected
characteristics or work patterns. In our Snapshot survey, 81% of
employees said they receive feedback that helps them improve their
performance, compared with 74% in 2022, and 81% feel motivated to
do the best job they can, up from 78% last year.
We have continued to enhance our 'At
Our Best' platform that allows colleagues to recognise each other's
contributions, by providing mobile access to encourage real-time
acts of appreciation. In 2023, colleagues made more than 1.4
million At Our Best recognitions, an increase of 13% from
2022.
Managers are encouraged to recognise
colleagues' service anniversaries every five years up to 40 years
of service. This also includes the presentation of a special
commemorative HSBC medallion. The At Our Best platform supports the
global service recognition programme, which in 2023 helped to
celebrate more than 30,000 service anniversaries.
Share plans are another way to
empower colleagues to participate in the Group's success and to
have a share in the rewards. In 2023, we expanded our global share
plan to include the Philippines, making it available to 91% of
colleagues globally. Our 2020 three-year Sharesave plan, in which
42% of UK employees took part, matured in November 2023. The share
price at maturity represented more than double the option price,
providing employees with significant share price growth. We ran
information webinars, attended by more than 11,000 colleagues, and
offered support resources to help our colleagues understand tax
considerations and the choices available to them at
maturity.
Supporting our colleagues to grow
To help our colleagues to grow
personally and professionally, we are committed to providing
flexibility and choice around how, when and where they work,
supporting their well-being, and helping them develop skills. The
sections on the next page detail the ways in which we support our
colleagues. For further details of our approach to skills and
career development, see page 83.
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Increasing social connection in the
office
Since the Covid-19 pandemic and the
return of colleagues to the office, we identified the need for
changes to improve team cohesion and a sense of belonging among our
colleagues in Hong Kong. To help address, this we created a new
type of work and social space at the HSBC Centre office in Kowloon,
Hong Kong.
'The Hub' is a flexible informal
space that can be adapted to accommodate a range of different group
activities and number of people, from large social events to
smaller team training sessions. It is also designed to be a
multi-level and interconnected space, with a central social meeting
point to enhance the sense of community, improve levels of
engagement and encourage greater social connection between
colleagues.
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Being a great place to work
continued
Social well-being and flexible working
In 2023, we focused on embedding
hybrid working across the Group and helping colleagues strike the
right balance of office and remote working.
Our colleagues continue to embrace
hybrid working, with 78% now splitting their time between home and
the workplace, compared with 58% in 2022. To support managers and
colleagues to continue to find the right balance between individual
flexibility and social connection, we have refreshed our training
to equip managers with skills to lead flexible teams. In 2023,
hybrid workers spent approximately 47% of their time in the
workplace, compared with 36% in 2022.
We know that getting the balance
right has a positive effect on our colleagues. Colleagues who spend
around 40% of their time in the workplace reported the highest
positive sentiment across key employee indices, including
engagement, trust and inclusion.
We track and measure responses from
our Snapshot survey to ensure our broader approach to flexibility
works for our customers and teams. A total of 81% of colleagues said they feel a genuine sense of
belonging to their team, a two percentage point increase from 2022.
A new question in the survey also found that 87% of new joiners
feel they receive the right level of face-to-face support in order
to succeed.
In the same survey, 76% of
colleagues said they are able to integrate their work and personal
life positively, a slight increase compared with 75% in 2022. To
help the work-life balance of our colleagues, in Australia, we have
introduced 20-weeks paid, gender-neutral parental leave for when a
child joins their family. Longer periods of paid parental leave
have also been introduced in Mexico, Singapore, South Korea, Taiwan
and Thailand.
Mental well-being
Supporting the mental health of our
colleagues remains a top priority. Cost-of-living pressures and
global crises continue to increase mental health challenges in many
countries and territories. Our Snapshot survey revealed a slight
decrease in mental well-being, with 83% of
colleagues rating their mental health as positive, compared with
84% in 2022. However, it also found that 74% of colleagues feel comfortable talking to their
manager about their mental health, and 77%
said they know how to access mental health support at work. Both
increased one percentage point compared with 2022.
We have continued to make the
meditation app Headspace and counselling services available to all
colleagues globally.
More than 200,000 colleagues took
part in mental health awareness training as part of global
mandatory training. Our voluntary mental health education modules
have been completed by 31,000 employees, with people managers
making up 74% of the completions. Our network of mindfulness
champions, who are specially trained colleagues who volunteer to
run mindfulness sessions, community events and courses for the
benefit of fellow colleagues, has almost 200 members with
representation in 22 countries and territories. In 2023, we held
1,400 mindfulness sessions, a 26% increase compared with 2022, and
these were attended by 25,000 colleagues.
Physical well-being
The Snapshot survey also revealed an
increase in physical well-being, with 74%
of colleagues rating their physical health as positive, compared
with 71% in 2022.
In February 2023, our Pay and
Benefits survey showed that 69% of colleagues highly valued the
health benefits we offer, and 34% of colleagues wanted more support
with physical activity and exercise. In response, we launched a
platform called Virgin Pulse, which incentivises colleagues to set
and track health goals, and to take part in active challenges.
Since launching globally in November 2023, more than 5,700
colleagues have downloaded the app and more than 30 activity
challenges have been run.
We have continued to provide access
to private medical insurance as well as telemedicine healthcare
services in the majority of our countries and territories, covering
98% of permanent employees. In certain countries and territories,
we also provide on-site medical centres that the majority of
colleagues can access.
Financial well-being
We recognise that financial
challenges remain a concern for colleagues, caused by increases in
the cost of living globally. Our Snapshot survey revealed a slight
increase in financial well-being, with 61% of colleagues reporting
positively, compared with 60% in 2022. Just over half (56%) of
colleagues said they have at least three months of essential
outgoings saved, the same as in 2022.
In 2023, we ran campaigns in all
regions to raise awareness of financial education and tools, and
more than 1,000 colleagues attended our seminars on psychology and
spending habits. We continue to offer retirement or longer-term
savings plans to 95% of permanent employees, and our life insurance
cover is available to 99.9% of colleagues to help provide financial
security for their families.
Awards
CCLA Global 100 Mental Health
Benchmark
- Ranked
number 1 global employer for the second consecutive
year
Prioritising benefits that matter
most to colleagues
For a second year our Pay and
Benefits survey showed that 59% of colleagues feel their benefits
meet their needs and those of their family 'well'. To improve
sentiment, we have focused on enhancing benefits in areas that
colleagues tell us are most important including health, saving for
the future and time off.
Cancer checks were made available to
all UK colleagues, as early detection can result in higher survival
rates. In the US, we have enhanced our fertility, adoption and
surrogacy benefits to support colleagues starting a family. We also
expanded our gender dysphoria benefits for LGBTQ+ colleagues in the
UK.
Carer leave of five paid working
days has also been introduced in the UAE, Egypt, Algeria, Bahrain,
Kuwait, Qatar, Türkiye, Saudi Arabia and Mexico.
To help employees plan for their
retirement, we became the first international bank to launch a
defined contribution pension plan in Vietnam. We also implemented a
new defined contribution plan in Guernsey and enhanced our
retirement savings plan in Egypt, to support employees to plan for
retirement with the benefit of employer contributions.
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Developing skills, careers and
opportunities
Learning and skills
development
We aim to build a dynamic
environment where our colleagues can develop skills and undertake
experiences that help them fulfil their potential. Our approach
helps us meet our key strategic priorities and support our
colleagues to achieve their career goals.
Our
learning and skills platforms
We continue to evolve the
opportunities to learn and develop at HSBC. We use a range of skill
development platforms, learning courses and resources to help
colleagues take ownership of their development and career,
including:
- HSBC
University, our home for learning and skills accessed online and
through a network of training centres, where learning is organised
through technical academies on topics of strategic
importance;
- Degreed,
our learning experience platform that provides access to internal
and external learning content and courses, where colleagues can
share, collaborate and learn with individuals and in groups via
learning pathways;
- Talent
Marketplace, our online platform that uses artificial intelligence
('AI') to match colleagues interested in developing specific skills
or career goals with opportunities that exist throughout our global
network; and
- Careers
at HSBC, which enables all employees to set alerts and search for
internal career opportunities.
Our
learning fundamentals
We expect all colleagues, regardless
of their contract type, to complete global mandatory training each
year. This training plays a critical role in shaping our culture,
ensuring a focus on the issues that are fundamental to our work,
such as sustainability, financial crime risk and our intolerance of
bullying and harassment. New joiners attend our Global Discovery
programme, which is designed to build their knowledge of the
organisation and engage with our purpose, values and
strategy.
As the risks and opportunities our
business faces change, our global academies adapt to offer general
and targeted development. Our Risk Academy provides learning for
every employee in traditional areas of risk management such as
financial crime risk, and also offers more specific development for
those in senior leadership, high-risk roles and learning for
colleagues on emerging issues such as ESG risk, terrorist
financing, proliferation financing and sanctions.
We have continued to deliver
targeted skills programmes, including our Vision 27 programme that
aims to ensure we are attracting, developing and retaining critical
technology talent. We have also expanded our Accelerating Wealth
Programme, which prioritises hiring for transferable skills rather
than experience. For further details of how we are achieving our
wealth goals in Asia, see page 84.
Building skills with Talent Marketplace
Our people capability teams partner
with businesses and functions to identify the key skills we need
now and in the future. We also continue to support colleagues to
develop new skills that achieve their career
aspirations.
We have helped colleagues identify
opportunities to enhance their skills through our Talent
Marketplace. More than 38,000 colleagues have created a profile on
the platform to help identify their existing skills and those they
would like to develop. In 2023, it matched colleagues to a number
of projects and networking opportunities unlocking over 123,000
hours of skills development.
Projects centred around Cloud
computing, data analytics, software development and project
management have created opportunities for colleagues to work on
in-demand skills.
Training at HSBC
In 2023, we continued to enable
colleagues to learn via a range of channels including digital and
on-the-job learning. This is reflected in a reduction in overall
learning hours as colleagues access different learning
channels.
5.3 million
Training hours by our colleagues in
2023.(2022: 6.3 million)
23.9 hours
Training hours per FTE in
2023.
(2022: 28.8 hours)
Identifying and retaining future
talent
The need for talent is greater than
ever. In 2023, a further 9,000 managers completed our compulsory
inclusive hiring training, promoting cognitive awareness of bias.
Our targeted talent programmes and enterprise-wide solutions are
designed to support employees transitioning to more complex roles,
and provide wider career opportunities and career
growth.
Our recruitment programmes are a key
enabler of achieving our broader diversity goals (see page
76). In 2023, we welcomed more than 720
graduates and 651 interns to the organisation. The graduate intake
represented 48 nationalities, over 25 ethnic backgrounds, and 51%
were women. In 2023, we continued to broaden our emerging talent
programmes beyond traditional graduate and internship programmes,
developing early access schemes for those in school and first year
of university, as well as expanding our apprenticeship scheme (see
page 84).
We continually refresh all our
talent programmes to ensure they remain aligned to HSBC's strategic
priorities. Our key programmes include:
- Accelerating Female Leaders, which has been re-designed in
partnership with Cranfield School of Management. This programme
supports female colleagues with learning materials, coaching and
senior sponsorship to help them prepare for leadership roles;
and
- Accelerating into Leadership, which aims to improve role
mobility and retention, and supports colleagues identified as
having the capacity, interest and drive to succeed in more complex
roles.
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Energising our colleagues for
growth
We aspire to offer colleagues the
opportunity to develop their skills while ensuring we build a
pipeline of talent to support our strategic priorities. It is vital
that we demonstrate the right leadership and create the right
environment to energise our colleagues for growth.
Skilling the transition to net zero
The Sustainability Academy was
launched in 2022 to support our net zero ambitions. As the academy
has evolved we have shifted the focus from knowledge building to
capability building across key colleague groups who are supporting
customers on their transition to net zero. In 2023, we applied four
main activities to support this effort:
- supplying
on-demand learning modules based on role, region and client-base
for colleagues who support customers with core transition
activities;
- creating
advanced workshops across our global businesses and functions to
build colleagues' knowledge and develop practical skills to achieve
business outcomes;
- encouraging external certifications and qualifications, where
required, to deepen colleagues' expertise; and
- designing
a 16-week sustainability leadership programme, in partnership with
Imperial College London, which combines education on core
sustainability concepts with change management, purpose and
leadership principles. In 2023, the programme was completed by more
than 170 senior leaders. Additional net zero learning opportunities
were also provided to the Board and 100 of our most senior
leaders.
We need to build strong leadership
and develop our colleagues' capabilities to navigate the transition
to net zero and achieve our climate goals. In 2023, we worked with
our internal experts from the Sustainability Centre of Excellence
to provide more advanced skills training in key transition areas
such as energy transition, climate technology and financed
emissions, alongside other core sustainability topics such as
biodiversity.
Supporting our Asia wealth strategy
Our ambition is to become the
preferred international financial partner for clients, and the
expansion of our wealth management services particularly in Asia,
sits at the heart of this ambition.
To help achieve this, we have
continued to expand our Accelerating Wealth Programme, which offers
a skills-based development plan for colleagues who are looking to
pursue a career as a relationship manager in wealth management. The
programme enables HSBC to develop talent from within and hire
talented people with different career backgrounds from outside the
business. In 2023, we extended the programme to external applicants
in Hong Kong and to internal applicants in mainland China, India
and Singapore. We will continue to add new countries and
territories in 2024 to provide a sustainable hiring channel for
front-line roles.
Technology transformation
We are committed to delivering
better customer outcomes through digital transformation. Our
technology transformation skills programme aims to ensure we
attract, develop and retain the skilled talent we need to execute
our strategy.
In 2023, our technology colleagues
completed more than 800,000 hours of learning and gained over 950
certifications in software development, cyber, AI, data processes,
Cloud computing and app development, among others. Our new
Principle Engineer and Principle Architecture accelerator
programmes have equipped colleagues with advanced technical
knowledge and skills, enhancing their ability to innovate in their
roles.
Leadership development
We continue to strengthen the
training and development opportunities we offer our leaders at all
levels of the Group, to ensure they are equipped with the clarity,
alignment and capability with our goals to drive the performance of
our organisation. In 2023, we significantly increased investment in
the development of our leadership population.
For senior leaders, our Executive
and Managing Director Leadership Programmes helped bring our
purpose and strategy to life through innovative flagship courses,
masterclasses and strategy briefing sessions.
We recognise the importance of
people managers in shaping the experience of our colleagues. In
2023, we re-designed our People Management Excellence programme to
better support managers at all levels. The face-to-face and virtual
training includes a focus on the role and expectations of managers,
how to design and organise work, and how to nurture a productive
team environment. In 2023, over 3,800 colleagues attended this
programme.
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Supporting UK emerging
talent
We continue to extend our emerging
talent programmes beyond traditional graduate and internship
schemes to support our socio-economic diversity ambitions (see page
78). In 2023, we awarded more than 100
apprenticeships to external and internal applicants. Our degree
apprenticeship programmes provided an alternative to the
traditional university route for 47 individuals, and we launched a
disability apprenticeship programme for our Marketing function. We
have also offered over 460 structured work placements to secondary
school students and continued to support the #merkybook financial
literacy programme for young people.
HSBC has funded 30 University of
Cambridge scholarships for Black and socially disadvantaged
students through our Stormzy partnership, and will invest a further
£2m to achieve 60 scholarships by 2026 to support underrepresented
groups. In 2023, Black heritage representation in our graduate and
summer internship programmes was 10% of job applicants and 11% of
new hires.
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Building customer inclusion and resilience
Our approach to customer inclusion
and resilience
We believe that financial services,
when accessible and fair, can reduce inequality and help more
people access opportunities. We are playing an active role in
opening up a world of opportunity for individuals by supporting
their financial well-being, and removing the different barriers
that people can face in accessing financial services.
Access to products and services
We provide innovative solutions to
help improve customer access to products and services. HSBC UK and
HSBC Hong Kong provide no-cost accounts for customers who do not
qualify for a standard account or who might need additional support
due to social or financial vulnerability. In 2023, HSBC Egypt ran a
campaign that allowed new customers to open bank accounts with no
minimum balance required and no account opening fees. In the UK, we
continue to make our branches more accessible by providing 'safe
spaces' for domestic abuse victims, where they can seek specialist
support and advice. In 2023, we also launched a specialist training
programme to raise awareness among our colleagues of modern slavery
and human trafficking. This has been completed by more than 5,300
UK colleagues. In addition, our strategic partnership with housing
and homelessness charity Shelter UK aims to support those in crisis
and build financial resilience solutions to help prevent
homelessness in the future.
Making banking accessible
Number of no-cost accounts held for
customers who do not qualify for a standard account or who might
need additional support due to social or financial
vulnerability.
Supporting financial knowledge and
education
We continue to invest in financial
education content and features across different channels to help
customers, colleagues and communities be confident users of
financial services.
Since 2020, we received over 6.6
million unique visitors to our global digital financial education
content. We continue to help customers expand their financial
capabilities through our personal financial management tools. In
2023, HSBC UK launched new capabilities on our app enabling
customers to manage their budgets, see their spending insights and
view financial fitness content. This new tab on the app has
attracted over 4.5 million unique visitors. We also added
investment pots and goals to help motivate customers to save for
the future.
In 2022, we launched our 'Well+'
reward programme on the HSBC HK Mobile Banking app to help
customers improve the health of their body, money and mind. Reward
points are earned by completing a series of simple activities, such
as building their financial knowledge. In 2023, we added new
capabilities, such as bonus badges, and more than 212,000 customers
have engaged with Well+ in Hong Kong since launch.
To help customers understand complex
products and make informed decisions, HSBC Life UK launched a
series of quick video guides to explain the key benefits,
exclusions and underwriting process of critical illness
cover.
To support Hong Kong customers with
special educational needs, we launched simple step-by-step guides,
which were shared with our partners, to explain how to access basic
banking services.
We also support programmes that help
expand the financial knowledge of children and young people to
ensure future resilience. HSBC Egypt partnered with Injaz Al-Arab,
a member of JA Worldwide, to deliver its 'building a financially
capable generation' programme to students in seven schools in
Cairo. In Mexico, we created a podcast, targeted at developing the
financial capabilities of young people with each episode covering a
specific theme, to enhance their basic financial
knowledge.
We continued to build on our
financial literacy programmes for young people in the UK, with the
launch of the first financial capability skills module for the Duke
of Edinburgh's Award.
Creating an inclusive banking experience
We aim to ensure that our banking
products and services are designed to be accessible for customers
experiencing either temporary or permanent challenging
circumstances, such as disability, impairment or a major life
event.
A simplified version of the HSBC HK
Mobile Banking app aims to continue to enhance digital inclusion
for all, including seniors. The app is the first of its kind among
Hong Kong banks and has attracted more than 477,000 unique users
since launch.
We are committed to improving
accessibility experiences across our digital channels and
continuously review our browser-based websites in 23 markets, and
our mobile banking services in 18 markets, against the WCAG 2.0 AA
standards. We also share our digital accessibility expertise with
partners, companies and colleagues. More than 10,000 people and 66
companies have taken advantage of our specialised training
programmes. To further share our best practice externally, HSBC
sponsored and hosted AbilityNet's Techshare Pro event in our Group
head office in London. Our work on digital accessibility was
recognised with 11 awards in 2023.
Support for customers extends beyond
our digital channels and we recognise that not all disabilities are
visible or immediately obvious to others. We have expanded our
commitment to the Hidden Disabilities Sunflower Lanyard Scheme,
rolling it out across the UK, Hong Kong, the Channel Islands and
Australia. The lanyard indicates that an individual may need a
little more help, support or time. HSBC UK is also making use of
virtual reality tools, such as EBOX (Empathy Box), to give
colleagues the opportunity to experience vulnerability from the
perspective of the customer.
In 2023, HSBC UK was awarded the UK
Construction Industry Council's Inclusive Environments Recognition
at the Organisational Level certification. This recognises the
strong organisation and design processes HSBC has put in place to
support accessible and inclusive design.
Supporting women
HSBC UAE and HSBC Singapore have
collaborated with digital financial education provider Sophia, to
create a programme designed specifically to help female customers
build their financial knowledge. It covers a range of topics,
including budgeting, ways to invest and investment
strategies.
In Mexico, our Mujeres Al Mundo
programme continues to support women as customers through products,
services, education and networking. In 2023, we also supported
female-owned businesses through our $1bn Female Entrepreneur Fund,
alongside hosting bespoke Pitch Day events for a number of female
entrepreneurs seeking investment.
Engaging with our communities
Building a more inclusive and
resilient world
We have a long-standing commitment
to support the communities in which we operate. We aim to empower
people and communities to develop the skills and knowledge needed
to thrive in the future.
Through the global reach of our
charitable partnerships we bring together diverse people, ideas and
perspectives that help us open up opportunities and build a more
inclusive world.
Building community and future skills
We work with charity partners to initiate programmes that help
people and communities respond to opportunities and challenges as
global economies transition towards a low-carbon future. In 2023,
these included:
- launching a three-year partnership with the British Council
in Brazil, Mexico, India, Indonesia and Vietnam, and extending The
Prince's Trust programmes in Australia, Canada, India and Malaysia,
to help young, marginalised people develop the skills they need to
thrive in the green economy;
- partnering with the Guangdong Lvya Rural Women Development
Foundation in China to help equip women in remote mountain areas
with sustainable farming skills; and
- partnering with the Ghabbour Foundation in Egypt to help
provide technicians with specialist skills training to work in the
electric vehicle market.
We also work with our charity
partners around the world to strengthen the resilience of
disadvantaged communities:
- In
Hong Kong, we announced a three-year partnership with Food Angel to
increase its capacity to provide meals to underprivileged elderly
groups.
- In
the US, we expanded our workforce development programme with
Feeding America to support communities to find meaningful
employment, especially mothers and Black, Indigenous People of
Colour women.
- In
the UK, we announced a three-year partnership with Shelter to help
develop the homeless charity's training, guidance, tools and
support within local communities to help build financial
resilience.
- In
France, we continued our work with Article 1 to help young people
from deprived communities succeed in higher education through
mentoring programmes.
- We
supported disaster relief agency response to humanitarian needs,
including those in Israel, Libya, Morocco, the Palestinian
territories, Türkiye, and the Hawaiian island of Maui.
Community engagement and volunteering
We offer paid volunteering days, and
encourage our people to offer their time, skills and knowledge to
causes within their communities. In 2023, our colleagues gave over
181,800 hours to community activities during work hours.
Awards
- National
CSR Fund 2023 UAE - Platinum Impact Seal
- Charitable giving by HSBC in China received recognition from
the China Philanthropy
Times
Charitable giving in 2023 (%)
Total cash giving towards charitable
programmes
$107.3m
Hours volunteered during work time
>181,800
People projected to be reached through our Future Skills
programme
1.25m
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Advancing financing and digital
literacy
Over the past five years, HSBC
worked with three microfinance networks to advance financial and
digital literacy of women from unbanked and underbanked communities
in India. The programme has engaged with more than 550,000 women to
build awareness and understanding of digital payment platforms, and
enhance their ability to access banking services, such as savings,
credit and insurance, as well as government welfare schemes. By the
end of 2023, 56,000 women had undertaken loan repayments worth
$521,000 via digital channels. Insights from the initiative will be
shared with financial institutions and the National Payment
Corporation of India, set up by the banking regulator to oversee
retail payments and settlement systems in India, to increase
unbanked households' access to financial services and
products.
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Governance
Acting responsibly
We remain committed to high
standards of governance.
We work alongside our regulators and recognise our
contribution to building healthy and sustainable
societies.
Our
relationship
We act on our responsibility to run
our business in a way that upholds high standards of corporate
governance.
Customer experience is at the heart
of how we operate. It is imperative that we treat our customers
well, that we listen, and that we act to resolve complaints quickly
and fairly. We measure customer satisfaction through net promoter
scores across each of our global businesses, listen carefully to
customer feedback so we know where we need to improve, and take
steps to do this. Our customer satisfaction performance improved in
many markets in which we operate, although we still have work to do
to improve our rank position against competitors.
We are committed to working with our
regulators to manage the safety of the financial system, adhering
to the spirit and the letter of the rules and regulations governing
our industry.
We strive to meet our
responsibilities to society, including through being transparent in
our approach to paying taxes. We also seek to ensure we respect
global standards on human rights in our workplace and our supply
chains, and continually work to improve our compliance management
capabilities.
For further details of our corporate governance, see our
corporate governance report on page 238.
In
this section
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Setting high standards of governance
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How
ESG is governed
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We expect that our approach to ESG
governance is likely to continue to develop, in line with our
evolving approach to ESG matters and stakeholder
expectations.
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Page
88
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Human rights
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Our
respect for human rights
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We have continued to raise awareness
and develop our understanding of our salient human rights
issues.
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Page
89
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Customer experience
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Customer satisfaction
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While we are ranked in the top three
banks against our competitors in 58% of our key markets across WPB
and CMB, we still have work to do to improve our rank position
against competitors
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Page
91
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How
we listen
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We aim to be open and transparent in
how we track, record and manage complaints.
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Page
92
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Integrity, conduct and fairness
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Safeguarding the
financial system
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We have continued our efforts to
combat financial crime and reduce its impact on our organisation,
customers and communities that we serve.
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Page
94
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Whistleblowing
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Our global whistleblowing channel,
HSBC Confidential, allows our colleagues and other stakeholders to
raise concerns confidentially.
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Page
94
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A
responsible approach to tax
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We seek to pay our fair share of tax
in all jurisdictions in which we operate.
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Page
95
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Conduct: Our product responsibilities
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Our conduct approach guides us to do
the right thing and to focus on the impact we have on our customers
and the geographies in which we operate.
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Page
96
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Our
approach with
our
suppliers
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We require suppliers to meet our
third-party risk compliance standards and we assess them to
identify any financial stability concerns.
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Page
96
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Safeguarding data
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Data privacy
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We are committed to protecting and
respecting the data we hold and process, in accordance with the
laws and regulations of the markets in which we operate.
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Page
97
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Cybersecurity
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We invest in our business and
technical controls to help prevent, detect and mitigate cyber
threats.
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Page
98
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Setting high standards of governance
How ESG is governed
The Board takes overall
responsibility for ESG strategy, overseeing executive management in
developing the approach, execution and associated reporting.
Progress against our ESG ambitions is reviewed
through Board discussion and review of key topics such as updates
on customer experience and employee sentiment. The Board is
regularly provided with specific updates on ESG matters, including
the financed emissions sector targets, human rights and employee
well-being. Board members receive ESG-related
training as part of their induction and ongoing development, and
seek out further opportunities to build their skills and experience
in this area. For further details of Board members' ESG
skills and experience, see page 239. For
further details of their induction and training in 2023, see page
253.
Given the wide-ranging remit of ESG
matters, the governance activities are managed through a
combination of specialist governance infrastructure and regular
meetings and committees, where appropriate. These include the Group
Disclosure and Controls Committee and Group Audit Committee, which
provide oversight for the scope and content of ESG disclosures, and
the Group People Committee, which provides oversight support for
the Group's approach to performance management. For some areas,
such as climate where our approach is more advanced, dedicated
governance activities exist to support the wide range of
activities, including climate risk management in the Environmental
Risk Oversight Forum.
The Group Chief Risk and Compliance
Officer and the chief risk officers of our PRA-regulated businesses
are the senior managers responsible for climate financial risks
under the UK Senior Managers Regime. Climate risks are considered
in the Group Risk Management Meeting and the Group Risk Committee,
with scheduled updates provided, as well as detailed reviews of
material matters, such as climate-related stress testing
exercises.
The diagram on the right
provides an illustration of our ESG governance
process, including how the Board's strategy on climate is cascaded
and implemented throughout the organisation. It identifies examples
of forums that manage both climate-related opportunities and risks,
along with their responsibilities and the responsible chair.
The structure of the process is similar for the escalation of
problems, with issues either resolved in a given forum or raised to
the appropriate level of governance with appropriate scope and
authority.
In 2023, we enhanced our ESG
governance with the establishment of a new Sustainability Execution
Committee, which focuses on defining and measuring the success of
our climate ambition, and developing commercial opportunities
that
support it through the
sustainability execution programme.
We expect that our approach to ESG
governance is likely to continue to develop, in line with our
evolving approach to ESG matters and stakeholder
expectations.
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How HSBC's climate strategy
is cascaded
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Opportunities
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Risks
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Group Executive
Committee
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Group Audit
Committee
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Group Risk
Committee
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ESG
Committee
Has oversight of ESG strategy,
policy, material commitments and external disclosure. Oversees and
monitors progress against ESG strategy, policies, plans, targets,
commitments and execution processes. Reports to the Board of
progress on the commitments, deliverables and targets under the
sustainability execution programme.
Co-Chairs: Group Chief Financial
Officer, and Group Chief Sustainability Officer
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Group Risk Management Meeting
Oversees the enterprise-wide
management of all risks, including updates relating to the Group's
climate risk profile and risk appetite, top and emerging climate
risks, and key climate initiatives.
Chair: Group Chief Risk and
Compliance Officer
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Sustainability Execution Committee
Has oversight of environmental
strategy, including commercial execution and operationalisation
through the sustainability execution programme. This included
financed and facilitated emissions targets and commitments,
implementation and execution of transition plans, and delivery of
$750bn to $1tn sustainable finance and investment by
2030.
Chair: Group Head of Commercial
Banking, and Group Chief Sustainability Officer
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Environmental Risk Oversight Forum
Oversees risk activities relating to
climate and sustainability risk management, including the
transition and physical risks from climate change. Equivalent
forums have been established at a regional level, where
appropriate.
Chair: Senior adviser, ESG
Risk
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Examples of ESG-related management
governance
The following governance bodies
support management in its delivery of ESG activities.
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Digital Business Services Executive
Committee
Oversees the global delivery of ESG
activities within our own operations, services and technology
elements of our strategy.
Chair: Group Chief Operating
Officer
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Group Reputational Risk Committee
Provides recommendations and advice
on significant reputational risk matters with impact across the
Group.
Chair: Group Chief Risk and
Compliance Officer
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Human Rights Steering Committee
Oversees the Group's evolving
approach to human rights and provides enhanced
governance.
Chair: Group Chief Risk and
Compliance Officer
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Our respect for human
rights
As set out in our Human Rights
Statement, we recognise the role of business in respecting human
rights. Our approach is guided by the UN Guiding Principles on
Business and Human Rights ('UNGPs') and the OECD Guidelines for
Multinational Enterprises on Responsible Business
Conduct.
Our
salient human rights issues
We continue to raise awareness and
develop our understanding of our salient human rights issues. These
are the human rights at risk of the most severe negative impact
through our business activities and relationships.
An extensive review of our salient
human rights issues conducted in 2022 identified five human rights
risks inherent to HSBC's business globally, and five types of
activity through which such risks might arise. These are
represented in the adjacent table.
In 2023, building on this
assessment, we provided practical guidance and training, where
relevant, to our colleagues across the Group on how to identify and
manage human rights risk.
We are now focusing on translating
this into risk management enhancements in two key areas of
activity. These are the services we provide to business customers
and the goods and services we buy from third parties.
Managing risks to human rights
In 2023, we continued the process of
adapting our risk management procedures to reflect what we learned
from our work on salient human rights issues and related
guidance.
We continued to embed and build on
the Sustainable Procurement Mandatory Procedure, which sets out the
minimum sustainability requirements for procurement activity.
This included enhanced procedures for human rights risk
identification through the introduction of a human rights residual
risk questionnaire for suppliers as part of our global onboarding
assessment process, and human rights supplier audit pilots in our
Asia-Pacific and Latin America regions to assess the potential need
for further supplier audits in the future.
New approaches to identifying and
managing human rights risk in respect of our business customers
have also been piloted. These included screening for indicators of
potential negative impacts on people, including media monitoring
and other relevant third-party data.
Our
salient human rights issues
Illustration of HSBC Group's
inherent human rights risks mapped to business
activities.
|
Inherent human rights risks
|
HSBC
activities
|
Employer
|
Buyer
|
Provider of products and services
|
Investor1
|
Personal customers
|
Business customers
|
Right to decent work
|
Freedom from forced
labour
|
|
u
|
|
u
|
u
|
Just and favourable conditions of
work
|
u
|
u
|
|
u
|
u
|
Right to health and safety at
work
|
u
|
u
|
u
|
u
|
u
|
Right to equality and freedom from
discrimination
|
u
|
u
|
u
|
u
|
u
|
Right to privacy
|
u
|
|
u
|
|
u
|
Cultural and land rights
|
|
u
|
|
u
|
u
|
Right to dignity and
justice
|
u
|
u
|
u
|
u
|
u
|
1
Investor includes our activities in HSBC Asset
Management.
|
We continued to develop our in-house
capability on human rights with the launch of further online
resources for all staff and bespoke human rights training for
colleagues in key roles, including those managing relationships
with suppliers, and those with responsibility for overseeing risk
management processes.
The actions we are taking to address
these salient human rights issues are consistent with our values
and will help us to meet our commitments on diversity and
inclusion, and those we have made under the UN Global Compact and
WEF metrics on risk for incidents of child, forced or compulsory
labour.
For further details of the actions taken to respect the right
to decent work, see our 2023 Annual Statement under the UK Modern
Slavery Act at www.hsbc.com/modernslaveryact.
For further details of the actions taken to respect the right
to equality and freedom from discrimination, see 'Our approach to
diversity and inclusion' on page 76.
Sustainability risk policies
Some of our business customers
operate in sectors where the risk of adverse human rights impact is
high. Our sustainability risk policies for agricultural
commodities, energy, forestry, mining and metals consider human
rights issues such as forced labour, harmful or exploitative child
labour and land rights. They also consider the rights of indigenous
peoples such as 'free prior and informed consent', workers' rights,
and the health and safety of communities.
Through our membership of
international certification schemes such as the Forestry
Stewardship Council, the Roundtable on Sustainable Palm Oil and the
Equator Principles, we support standards aimed at respecting human
rights.
Our sustainability risk policies are
reviewed periodically to ensure they reflect our
priorities.
For further details, see our sustainability risk policies at
www.hsbc.com/who-we-are/esg-and-responsible-business/managing-risk/sustainability-risk.
Financial crime controls
The risk of us causing, contributing
or being linked to adverse human rights impacts is also mitigated
by our financial crime risk framework, which includes our global
policies and associated controls.
For further details of how we fight financial crime, see
www.hsbc.com/who-we-are/esg-and-responsible-business/fighting-financial-crime.
Our respect for human rights
continued
Driving change
We continued to participate in industry forums, including the Thun
Group of Banks, which is an informal group that seeks to promote
understanding of the UNGPs within the sector, and the UN Global
Compact Human Rights Working Group.
HSBC has been a member of the Mekong
Club since 2016. We are a participant of its monthly financial
services working group, and we use its informative typological
toolkits, infographics, and other multimedia resources covering
current and emerging issues. Our Compliance teams regularly
collaborate and engage with the Mekong Club in designing Group-wide
knowledge sharing and training sessions.
Investments
Since 2022, HSBC Asset Management
has published an annual Global
Stewardship Plan outlining its approach to engagement,
prioritisation of investee companies, objective-setting and
escalation procedures. The plan also highlights its thematic
priorities including human rights.
HSBC Asset Management recognises
collaborative engagement as a tool to promote change. It
participates in investor-led joint engagement initiatives where it
believes these can have a positive influence. It is a signatory to
the Principles for Responsible Investment Advance initiative to
promote active stewardship on human rights and social issues. It
has also actively contributed to other sector-specific initiatives,
including engaging with technology firms on digital rights and
responsible AI, and working with ESG data providers to promote
higher quality human rights data set.
HSBC Asset Management has also
incorporated human rights and modern slavery considerations into
its Global Voting Guidelines. This helps to identify non-compliance
with UN Global Compact principles, as well as a company's
competency in human rights management and disclosures. Where a
company falls below expectations, HSBC Asset Management may vote
against the re-election of the board chair or relevant board
director.
As a signatory to the Net Zero Asset
Management Initiative, HSBC Asset Management is taking steps to
reduce the carbon exposure of its portfolios and engage with
issuers on their climate strategies. It also recognises the impact
that the climate transition can have on workers, communities,
consumers and other stakeholders, and has published its
perspectives on a just transition.
For the Global Stewardship Plan, see
www.assetmanagement.hsbc.co.uk/-/media/files/attachments/uk/policies/stewardship-plan-uk.pdf.
For further details of the Net Zero Asset Management
Initiative, see
www.assetmanagement.hsbc.co.uk/en/institutional-investor/about-us/road-to-net-zero/a-transition-for-everyone.
Monitoring
effectiveness
|
Metric
|
2023
|
2022
|
Contracted suppliers who either
confirmed adherence to the code of conduct or provided their own
alternative that was accepted by our Global Procurement
function
|
95
%
|
93 %
|
Employees who have received training
on human rights
|
8,176
|
520
|
Votes by HSBC Asset Management
against management for reasons including human
rights1
|
213
|
87
|
1
The figure represents the number of resolutions at investee company
shareholder meetings (including AGMs) where votes were cast against
management for reasons related to human rights.
|
Supporting those impacted and those
potentially at risk
We continued to expand our Survivor
Bank programme, which has now supported over 3,000 survivors of
modern slavery and human trafficking in the UK, and is a model for
making financial services more accessible to vulnerable communities
worldwide.
We built on this experience in
developing access to banking services for customers with no fixed
abode in the UK and in Hong Kong, providing over 5,700 accounts
under these programmes.
For further details of our work to support vulnerable
communities, see page 86.
Effectiveness
The table
below includes some indicative metrics we use to measure
year-on-year continual improvement to our human rights
processes.
For further diversity and inclusion metrics, see page
76 in this ESG review, as well as Section
4 of the 2023 Annual Statement under the UK Modern Slavery Act,
which is available at
www.hsbc.com/who-we-are/esg-and-responsible-business/modern-slavery-act.
|
|
Working for a just
transition
Just Energy Transition Partnerships
are becoming increasingly popular bringing key stakeholders
together to enable a clean, fair energy transition in emerging
economies that rely heavily on coal. Essentially, they are
multilateral financial agreements aimed at accelerating the
phase-out of fossil fuels, in a way that addresses the social
consequences of doing so.
For further details on HSBC's role
in Just Energy Transition Partnerships with Indonesia and Vietnam,
see
www.hsbc.com/news-and-views/views/hsbc-views/jetps-powering-a-faster-energy-transition.
Read more on Just Energy Transition
Partnerships on page 68 of this ESG
Review.
|
We remain committed to improving
customers' experiences. In 2023, we gathered feedback from over one
million customers across our three global businesses to help us
understand our strengths and the areas we need to focus on. We were
ranked among the top three banks against our competitors in
58% of our six key markets across WPB and
CMB1.
This was lower than in 2022 when we were ranked among the top three
banks against our competitors in 66% of our key markets.
Customer satisfaction
Listening to drive improvement
We have continued to embed our
feedback system so we can better listen, learn and act on our
customers' feedback. We use the net promoter score ('NPS') to
provide a consistent measure of our performance. NPS is measured by
subtracting the percentage of 'detractors' from the percentage of
'promoters'. 'Detractors' are customers who provide a score of 0 to
6, and 'promoters' are customers who provide a score of 9 to 10 to
the question: 'On a scale on 0 to 10, how likely is it that you
would recommend HSBC to a friend or colleague'.
We run studies that allow us to
benchmark ourselves against other banks. We try to make it as easy
as possible for customers to give us feedback, accelerating our use
of digital real-time surveys to capture insight. By sharing this
and other feedback with our front-line teams, and allowing them to
respond directly to customers, we are improving how we address
issues and realise opportunities.
In 2023, we launched the CMB
Customer Impact Forum, a dedicated global forum set up to provide
oversight of our business and corporate customers' experiences and
promote continuous improvement. This, alongside our WPB 'Customer
in the room' programme launched in 2022, helps ensure we use
feedback in all aspects of how we run our business and prioritise
initiatives that matter most to our customers.
How
we fared
In WPB, our NPS increased in four of
our six key markets, which were Hong Kong, Mexico, India and
Singapore. Our NPS in the UK declined slightly, largely among our
mass affluent customers. In Hong Kong, we remained first overall
against our competitors, driven by our mass affluent customers. In
India we ranked in first place, driven by increased digitalisation.
We introduced digital self-service solutions for updating customer
details and downloading key documents, and digitised our onboarding
process. We were also a top three bank in mainland China, based on
2022 data (see footnote 3 in the adjacent table).
In our private bank, our global NPS
increased to 42 points, compared with 25 points in 2022. This was
largely due to increased customer satisfaction in Asia, with
improved scores in Hong Kong, Singapore, Taiwan and mainland China.
This was driven by relationship manager engagement and enhancements
to our digital services.
In CMB, we were ranked among the top
three banks against our competitors in four of our six key markets.
We ranked first in Hong Kong and as a top three bank in mainland
China, Singapore and Mexico. In India and the UK, we were ranked
outside the top three. Our NPS rank improved in the UK, driven by
our business banking customers and our top three ranking among UK
corporate customers. Our NPS declined slightly among our mid-market
enterprise customers.
In GBM, we had one of the highest
NPS scores in the market against our competitors, including the
quality of our digital trade finance platforms and for satisfaction
with our digital capabilities.
Number of markets in top three or improving rank 1,
2
|
|
2023
|
WPB 3
|
3 out of 6
|
CMB
|
5 out of 6
|
1
The six markets comprise: the UK, Hong Kong, Mexico, mainland
China, India and Singapore. Rank positions are provided using data
gathered through third-party research agencies.
2.
We benchmark our NPS against our key competitors to create a rank
position in each market. This table is based is on the number of
markets where we are in the top three or have improved rank from
the previous year.
3
Our WPB NPS ranking in mainland China is based on 2022 results. Due
to data integrity challenges, we are unable to produce a 2023
ranking. The next mainland China results will be in
2024.
|
Acting on feedback
We have continued to focus on
developing our products and services, and enhancing our digital
capabilities to improve customer experience.
In WPB, we redesigned our
international products and services to make it quicker and easier
to bank internationally. This involved the launch of six products
and services across 10 international markets. International
customers can open an international account digitally
pre-departure, gain access to a credit card in their new market,
and make use of cross-border payment solutions with 24/7 global
support to manage their international needs.
In CMB, we introduced a new credit
application system, the Digital Credit Portal, in 15 markets. It
uses internal and external data combined with automation to
streamline credit journeys. In Hong Kong, the portal also
integrates with a credit decision engine to automate credit
decisions for qualifying customers, reducing the assessment time on
loan approvals from days to as little as a few minutes. Our digital
onboarding tool, SmartServe, has been implemented in 21 markets to
support international and domestic account opening. We have
onboarded 89% of eligible customers through the digital platform,
with 72% of customers rating this experience as 'easy'.
In GBM, we continued to execute our
strategy and refine the client coverage model. In 2023, we
accelerated our 'originate-to-distribute' model, providing clients
with an effective capital efficiency strategy. We have refinanced
our in-country and cross-border coverage model in mainland China
and refreshed our growth plans in India based on client feedback.
We also launched growth initiatives against our Asia-MENAT corridor
to better service our clients.
|
To improve how we serve our
customers, we must be open to feedback and acknowledge when things
go wrong. We continue to adapt at pace to provide support for
customers facing new challenges, new ways of working and those that
require enhanced care needs.
We aim to be open and consistent in
how we track, record and manage complaints, although as we serve a
wide range of customers - from personal banking and wealth
customers to large corporates, institutions and governments - we
tailor our approach in each of our global businesses. As the table
on the right demonstrates, we have a consistent set of principles
that enable us to remain customer-focused throughout the complaints
process.
For further details of
complaints volumes by geography, see our ESG Data Pack at
www.hsbc.com/esg.
How
we handle complaints
|
Our
principles
|
Our
actions
|
Making it easy for customers to complain
|
Customers can complain through the
channel that best suits them. We provide a point of contact along
with clear information on next steps and timescales.
|
Acknowledging complaints
|
All colleagues welcome complaints as
opportunities and exercise empathy to acknowledge our customers'
issues. Complaints are escalated if they cannot be resolved at
first point of contact.
|
Keeping the customer up to date
|
We set clear expectations and keep
customers informed throughout the complaint resolution process
through their preferred channel.
|
Ensuring fair resolution
|
We thoroughly investigate all
complaints to address concerns and ensure the right outcome for our
customers.
|
Providing available rights
|
We provide customers with
information on their rights and the appeal process if they are not
satisfied with the outcome of the complaint.
|
Undertaking root cause analysis
|
Complaint causes are analysed on a
regular basis to identify and address any systemic issues and to
inform process improvements.
|
Wealth and Personal Banking
('WPB')
In 2023, we received approximately
1.2 million complaints from customers. The ratio of complaints per
1,000 customers per month in our large markets remained stable at
around 2.3.
In the UK, complaints fell 19%. In
2023, we applied the new UK Consumer Duty rules to our complaint
handling processes and invested in root cause analysis to ensure
good outcomes and avoid instances of foreseeable harm. We will
continue to focus on enhancing our processes and on training
complaint handlers to improve the customer experience and reduce
our complaint volumes further.
The decrease in complaints in Hong Kong was primarily driven by
improvements in our digital capabilities to make it easier for
customers to connect with us. Regular reviews, analysis of customer
feedback and greater collaboration across business lines to address
emerging customer pain points also contributed to the fall in
complaints.
In response to an increase in credit
and debit card fraud attacks in Mexico during the first quarter of
2023, we focused on strengthening our monitoring and fraud
detection capabilities to help protect our customers. In October,
we also released the new Visa Account Attack Intelligence tool to
mitigate foreign e-commerce attacks on customer debit cards. As a
result of these efforts, average monthly complaints in Mexico for
the last nine months of the year decreased by 20.5% compared with
the first quarter.
In our private bank, we received 507
complaints, an increase of 176 compared with 2022. This was largely
due to growth in our customer base since establishing new private
banking operations in the UAE and Mexico, along with an increase in
complaints in the US. This led to an increase in administration and
service issues, a high proportion of which were attributable to
delays and errors in processing client instructions. Overall, the
private bank resolved 465 complaints. Complaint data for the new
private banking operation in India was reported within the WPB
figures, pending system development to separately report the
complaint figures.
WPB
complaint volumes1
(per 1,000 customers per
month)
|
|
|
2023
|
2022
|
Total2
|
|
2.3
|
2.3
|
UK3
|
q
|
1.1
|
1.4
|
Hong Kong3
|
q
|
0.9
|
1.0
|
Mexico3
|
p
|
5.2
|
5.1
|
1
A complaint is any expression of dissatisfaction about WPB's
activities, products or services where a response or resolution is
explicitly or implicitly expected.
2
Markets included: Hong Kong, mainland China, France, the UK, UAE,
Mexico, Canada and the US.
3
The UK, Mexico and Hong Kong make up 86% of total
complaints.
|
Acting on feedback
In 2023, we continued to develop and
embed tools and capabilities across our business to deliver
improved experiences for our customers around the world. Through
our measurement of customer experience, we identify opportunities
for improvement, develop agile customer experience plans and track
and measure our progress. As a result of standardising our approach
to customer experience globally, we have strengthened our
capability to listen, understand and act on what our customers are
telling us on a regular basis.
|
How we listen continued
Commercial Banking
('CMB')
In 2023, we received 45,899 customer
and client complaints, a decrease of 27% from 2022. Of the overall
volumes, 33,777 came from HSBC UK and 7,354 from
Asia-Pacific.
The most common complaint related to
servicing and transactions, with the largest volume of complaints
globally coming from business banking customers, which represented
87% of our total complaints.
We attribute the overall decrease in
our complaint volumes to enhanced training of our front-line
colleagues to ensure they can identify the differences between a
complaint, query and feedback. We also focused on addressing the
root causes of the complaint trends, as well on improvements to our
systems, processes and advice to our clients.
We resolved 47,812 complaints
globally in 2023. The average resolution time for complaints was 24
days, which was just above our global target of 20 days.
CMB
complaint volumes1
(000s)
|
|
|
2023
|
2022
|
Total
|
|
46
|
63
|
UK
|
q
|
33.8
|
49.2
|
Hong Kong
|
q
|
6.5
|
8.1
|
|
Acting on feedback
In 2023, we focused on improvements
to our governance of complaints, creating regular forums in key
markets to ensure that analysis of the root cause of issues and
trends are prioritised to enhance our understanding of pain points
for our customers. Since the Covid-19 pandemic, there has been
increased efforts Group-wide to identify customers who are more
exposed to harm or declare as vulnerable. In 2023, we focused on
identifying these complaint types to ensure that we can offer
adjustments and support within our processes. This new process
helps to improve our understanding and support of clients at risk
of financial or non-financial harm to ensure our banking services
are accessible to all.
|
Global Banking and Markets
('GBM')
In 2023, we received 1,552 customer
complaints in Global Banking, a decrease of 27% from 2022. Of the
overall complaint volumes, 49% came from Europe and 23% came from
the Middle East, North Africa and Türkiye. The most common
complaint, at 38% of total complaints, related to servicing, which
was in line with previous years.
In Markets and Securities Services
('MSS') complaints increased by 21% to 354. We attribute some
of the increase to improvements in our data
reporting processes globally. The majority of complaints
were operational in nature and resolved in a timely manner.
Of the overall MSS complaints, 47% came from Europe and 34% from
Asia, our two largest markets.
GBM
complaint volumes1
|
|
|
2023
|
2022
|
Total
|
|
1,906
|
2,419
|
Global
Banking2
|
q
|
1,552
|
2,127
|
Global Markets and Securities
Services3
|
p
|
354
|
292
|
|
Acting on feedback
We have continued to invest in our
client feedback tool to create a more consistent and streamlined
experience for colleagues across GBM and our wholesale businesses
globally. In 2023, we introduced additional automation to improve
the process of logging complaints, and simplified our procedures to
make it easier for front-line colleagues to record feedback. We
have also introduced mandatory training around conduct and
complaints to ensure our people are acting on the feedback they
receive and are consistent in how they evaluate queries and
complaints.
|
1
Globally, a complaint is any expression of dissatisfaction, whether
justified or not, relating to the provision of, or failure to
provide, a specific product or service or service activity. Within
the UK, a complaint is any expression of dissatisfaction - whether
justified or not - about our products, services or activities which
suggests we have caused (or might cause) financial loss, or
material distress or material inconvenience.
2
Global Banking also includes Global Payments Solutions (previously
known as Global Liquidity and Cash Management) and complaints
relating to payment operations, which is part of Digital Business
Services.
3
Contains Global Research complaint volumes.
Integrity, conduct and fairness
Safeguarding the financial
system
We have continued our efforts to
combat financial crime and reduce its impact on our organisation,
customers and the communities that we serve. Financial crime
includes fraud, bribery and corruption, tax evasion, sanctions and
export control violations, money laundering, terrorist financing
and proliferation financing.
We manage financial crime risk
because it is the right thing to do to protect our customers,
shareholders, staff, the communities in which we operate, as well
as the integrity of the financial system on which we all rely. We
have a financial crime risk management framework that is applicable
across all global businesses and functions, and in all countries
and territories in which we operate. The financial crime risk
framework, which is overseen by the Board, is supported by our
financial crime policy that is designed to enable adherence to
applicable laws and regulations globally. Annual global mandatory
training is provided to all colleagues, with additional targeted
training tailored to certain individuals. We carry out regular risk
assessments to identify where we need to respond to evolving
financial crime threats, as well as to monitor and test our
financial crime risk management programme.
We continue to invest in new
technology, including through the deployment of a capability to
monitor correspondent banking activity. We are also enhancing our
fraud monitoring capability and our trade
screening controls, and investing in
the application of machine learning to improve the accuracy and
timeliness of our detection capabilities.
These new technologies should
enhance our ability to respond effectively to unusual activity and
be more granular in our risk assessments. This helps us to protect
our customers, the organisation and the integrity of the global
financial system against financial crime.
Our
anti-bribery and corruption policy
Our global financial crime policy
requires that all activity must be: conducted without intent to
bribe or corrupt; reasonable and transparent; considered to not be
lavish nor disproportionate to the professional relationship;
appropriately documented with business rationale; and authorised at
an appropriate level of seniority. There were no concluded legal
cases regarding bribery or corruption brought against HSBC or its
employees in 2023. Our global financial crime policy requires that
we identify and mitigate the risk of our customers and third
parties committing bribery or corruption. Among other controls, we
use customer due diligence and transaction monitoring to identify
and help mitigate the risk that our customers are involved in
bribery or corruption. We perform anti-bribery and corruption risk
assessments on third parties that expose us to this
risk.
|
The scale of our work
Each month, on average, we
monitor
over 1.35 billion transactions for
signs of
financial crime. In 2023, we
filed
over 96,000 suspicious activity
reports
to law enforcement and
regulatory
authorities where we identified
potential
financial crime. We perform daily
screening of 125 million customer records for sanctions exposure.
In 2022, we reported screened customer records as a monthly
average, although screening was, and continues to be, performed on
a daily basis.
|
98%
Total percentage of permanent and
non-permanent employees who received financial crime training,
including on anti-bribery and corruption.
We want colleagues and stakeholders
to have confidence in speaking up when they observe unlawful or
unethical behaviour. We offer a range of speak-up channels to
listen to the concerns of individuals and have a zero tolerance
policy for acts of retaliation.
Listening through whistleblowing channels
Our global whistleblowing channel,
HSBC Confidential, is one of our speak-up channels, which allows
colleagues and other stakeholders to raise concerns confidentially
and, if preferred, anonymously (subject to local laws). In most of
our markets, HSBC Confidential concerns are raised through an
independent third party, offering 24/7 hotlines and a web portal in
multiple languages. We also provide and monitor an external email
address for concerns about accounting, internal financial controls
or auditing matters (accountingdisclosures@hsbc.com). Concerns are
investigated proportionately and independently, with action taken
where appropriate. This can include disciplinary action, such as
dismissal and adjustments to variable pay and performance ratings,
or operational actions including changes to policies and
procedures.
We actively promote our full range
of speak-up channels to colleagues to help ensure their concerns
are handled through the most effective route. In 2023, 4% fewer
concerns were raised through HSBC Confidential compared with 2022.
Of the concerns investigated through the HSBC Confidential channel
in 2023, 81% related to individual behaviour and personal conduct,
14% to security and fraud risks, 4% to compliance risks and less
than 1% to other categories.
The Group Audit Committee has
oversight of the Group's whistleblowing arrangements, and the Chair
of the Group Audit Committee acts as HSBC's Whistleblowers'
Champion with responsibility for ensuring and overseeing the
integrity, independence and effectiveness of the Group's policies
and procedures.
Regulatory Compliance sets the
whistleblowing policy and procedures, and provides the Group Audit
Committee with periodic updates on their effectiveness. Specialist
teams and investigation functions own whistleblowing controls, with
monitoring in place to determine control effectiveness.
For further details of the role of the Group Audit Committee
in relation to whistleblowing, see page 270.
HSBC Confidential concerns raised in 2023:
1,746
(2022: 1,817)
Substantiation rate of concerns investigated through HSBC
Confidential in 2023:
41%
(2022: 41%)
A responsible approach to
tax
We seek to pay our fair share of tax
in all jurisdictions in which we operate, and to minimise the
likelihood of customers using our products and services to evade or
inappropriately avoid tax. We also abide by international protocols
that affect our organisation. Our approach to tax and governance
processes is designed to achieve these goals.
Through adoption of the Group's risk
management framework, we seek to ensure that we do not adopt
inappropriately tax-motivated transactions or products, and that
tax planning is scrutinised and supported by genuine commercial
activity. HSBC has no appetite for using aggressive tax
structures.
With respect to our own taxes, we
are guided by the following principles:
- We
are committed to applying both the letter and spirit of the law.
This includes adherence to a variety of measures arising from the
OECD Base Erosion and Profit Shifting initiative including the
'Pillar Two' global minimum tax rules which will apply to the Group
from 2024. These rules seek to ensure that the Group pays tax at a
minimum rate of 15% in each jurisdiction in which it operates. We
have identified 12 jurisdictions that may have an effective tax
rate below 15% in 2024. We continually monitor the number of active
subsidiaries within each jurisdiction as part of our ongoing entity
rationalisation programme.
-
We seek to ensure that our
entities active in nil or low tax jurisdictions have clear business
rationale for why they are based in these locations and appropriate
transparency over their activities.
- We seek
to have open and transparent relationships with all tax
authorities. Given the size and complexity of our organisation,
which operates across over 60 jurisdictions, a number of areas of
differing interpretation or disputes with tax authorities exist at
any point in time. We cooperate with the relevant local tax
authorities to mutually agree and resolve
these in a timely manner.
With respect to our customers'
taxes, we are guided by the following principles:
- We
have made considerable investments to
support external tax transparency initiatives and reduce the risk
of banking services being used to facilitate customer tax evasion.
Initiatives include the US Foreign Account Tax Compliance Act, the
OECD Standard for Automatic Exchange of Financial Account
Information ('Common Reporting Standard'), and the UK legislation
on the corporate criminal offence of failing to prevent the
facilitation of tax evasion.
- We
implement processes that aim to ensure that inappropriately
tax-motivated products and services are not provided to our
customers.
Our
tax contributions
The effective tax rate for the year
of 19.1% was higher than in the previous year (2022: 4.7%). The
effective tax rate for the year was increased by 2.3% from the
non-taxable impairment of the Group's interest in BoCom, and
reduced by 1.6% by the release of provisions for uncertain tax
positions and by 1.5% by the non-taxable provisional gain on the
acquisition of SVB UK. Further details are provided on page
369.
The UK bank levy charge for 2023 of
$339m was higher than the charge of $13m in 2022, mainly due to
adjustments arising upon filing prior year returns, which
represented a credit in 2022 and a charge in 2023.
As highlighted below, in addition to
paying $6.8bn of our own tax liabilities during 2023, we collected
taxes of $10.8bn on behalf of governments around the world. A more
detailed geographical breakdown of the taxes paid in 2023 is
provided in the ESG Data
Pack.
1Other duties and levies
includes property taxes of $91m (2022: $94m)
Conduct: Our product
responsibilities
Our conduct approach guides us to do
the right thing and to focus on the impact we have for our
customers and the financial markets in which we operate. It is
embedded into the way we design, approve, market and manage
products and services, with a focus on five clear
outcomes:
- We
understand our customers' needs.
- We
provide products and services that offer a fair exchange of
value.
- We
service customers' ongoing needs and put it right if we make a
mistake.
- We act
with integrity in the financial markets we operate in.
- We
operate resiliently and securely to avoid harm to customers and
markets.
We train all our colleagues on our
approach to customer and market conduct, helping to ensure our
conduct outcomes are part of everything we do.
Designing products and services
Our approach to product development
is set out in our policies and provides a clear basis on which
informed decisions can be made. Our policies require that products
must be fit-for-purpose throughout their existence, meeting
regulatory requirements and associated conduct outcomes.
Our approach includes:
- designing
products to meet identified customer needs;
- managing
products through governance processes, helping to ensure they meet
customers' needs and deliver a fair exchange of value;
- periodically reviewing products to help ensure they remain
relevant and perform in line with expectations we have set;
and
- improving, or withdrawing from sale, products which do not
meet our customers' needs or no longer meet our high
standards.
Meeting our customers' needs
Our policies and procedures set
standards to ensure that we consider and meet customer needs. These
include:
- enabling
customers to understand the key features of products and
services;
- enabling
customers to make informed decisions before purchasing a product or
service; and
- ensuring
processes are in place for the provision of advice to
customers.
They help us provide the right
outcomes for customers, including those with enhanced care needs.
This helps us to support customers who are more vulnerable to
external impacts, including the current cost of living crisis (see
'Supporting our customers in challenging economic times' on page
15).
Financial promotion
Our policies help to ensure that in
the sale of products and services, we use marketing and product
materials that support customer understanding and fair customer
outcomes. This includes providing information on products and
services that is clear, fair and not misleading. We also have
controls in place to ensure our cross-border marketing complies
with relevant regulatory requirements.
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Product governance
Our product management policy covers
the entire lifecycle of the product. This helps ensure that our
products meet our requirements before we sell them and allows
continued risk-based oversight of product performance against the
intended customer outcomes.
When we decide to withdraw a product
from sale, we aim to consider the implications for our existing
customers and agree actions to help them achieve a fair outcome
where appropriate.
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Our approach with our
suppliers
We maintain global standards and
procedures for the onboarding and use of third-party suppliers. We
require suppliers to meet our third-party risk compliance standards
and we assess them to identify any financial stability
concerns.
Sustainable procurement
Supporting and engaging with our
supply chain is vital to the development of our sustainable
procurement processes. In 2023:
- We
published net zero guides to help buyers and suppliers understand
our net zero ambitions. The guides explain our carbon reduction
requirements and provide practical advice for meeting these
ambitions, as laid out in our supplier code of conduct.
- We began
developing decarbonisation plans for high-emitting procurement
categories, including real estate services, telecommunications,
data centres and servers, and computer hardware. Engagement with
suppliers has given us a better understanding of their
decarbonisation efforts and the challenges and opportunities of
achieving net zero in these categories. As a result, strategies for
these procurement categories will include decarbonisation plans
from 2024 onwards.
- We
completed analysis to understand the impacts and dependencies of
our supply chain on biodiversity. The analysis will inform the
development of a biodiversity strategy for global procurement in
2024, to reduce supply chain biodiversity impacts.
-
We launched the supplier diversity portal in the
UK and US. The portal enables small and medium-sized enterprises or
businesses, which are majority-owned, operated and controlled by
historically underrepresented groups, to register interest in
becoming an HSBC supplier. For further details, see
www.hsbc.com/our-approach/risk-and-responsibility/working-with-suppliers.
Supplier code of conduct
Our supplier code of conduct sets
out our ambitions, targets and commitments on the environment,
diversity and human rights, and outlines the minimum standards we
expect of our suppliers on these issues. We seek to formalise
adherence to the code with clauses in our supplier contracts, which
support the right to audit and act if a breach is discovered. At
the end of 2023, 95% of approximately
10,400 contracted suppliers had either confirmed adherence to the
supplier code of conduct or provided their own alternative that was
accepted by our Global Procurement function.
For further details of the
number of suppliers in each geographical region, see the ESG Data
Pack at www.hsbc.com/esg.
We are committed to protecting and
respecting the data we hold and process, in accordance with the
laws and regulations of the markets in which we operate.
Our approach rests on having the
right talent, technology, systems, controls, policies and processes
to ensure appropriate management of privacy risk. Our Group-wide
privacy policy and principles provide a consistent global approach
to managing data privacy risk, and must be applied by all our
global businesses and functions. Our privacy principles are
available at
www.hsbc.com/who-we-are/esg-and-responsible-business/managing-risk/operational-risk.
We conduct regular employee training
and awareness sessions on data privacy and security issues
throughout the year. This includes mandatory training for all our
colleagues globally, with additional training sessions, where
needed, to keep up to date with new developments in this
space.
We provide transparency to our
customers and stakeholders on how we collect, use and manage their
personal data, and their associated rights. Where relevant, we work
with third parties to help ensure adequate protections are
provided, in line with our data privacy policy and as required
under data privacy law. We offer a broad range of channels in the
markets where we operate, through which customers and stakeholders
can raise concerns about the privacy of their data.
Our dedicated privacy teams report
to the highest level of management on data privacy risks and
issues, and oversee our global data privacy programmes. We review
data privacy regularly at multiple governance forums, including at
Board level, to help ensure appropriate challenge and visibility
for senior executives. Data privacy laws and regulations continue
to evolve globally. We continually monitor the regulatory
environment to ensure we respond appropriately to any
changes.
As part of our three lines of
defence model, our Global Internal Audit function provides
independent assurance as to whether our data privacy risk
management approaches and processes are designed and operating
effectively. In addition, we have established data privacy
governance structures, and continue to embed accountability across
all businesses and functions.
We continue to implement industry
practices for data privacy and security. Our privacy teams work
closely with our data protection officers, industry bodies and
research institutions to drive the design, implementation and
monitoring of privacy solutions. We conduct regular reviews and
privacy risk assessments, and continue to develop solutions to
strengthen our data privacy controls.
We continue to enhance our internal
data privacy tools to improve accountability for data privacy. We
have procedures to articulate the actions needed to deal with data
privacy considerations. These include notifying regulators,
customers or other data subjects, as required under applicable
privacy laws and regulations, in the event of a reportable incident
occurring.
Intellectual property rights practices
We have a group intellectual
property risk policy, supported by controls and guidance, to manage
risk relating to intellectual property. This is to help ensure that
commercially and strategically valuable intellectual property is
identified and protected appropriately, including by applying to
register trademarks and patents and enforcing our intellectual
property rights against unauthorised use by third parties. Our
intellectual property framework also helps us avoid infringement of
third-party intellectual property rights, supporting our consistent
and effective management of intellectual property risk in line with
our risk appetite.
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Data Privacy Day
In January 2023, we held a hybrid
roundtable event for our colleagues to mark International Data
Privacy Day. The event was hosted by our Global Head of Data Legal,
and guest speakers included the former UK Information Commissioner
and industry specialists from an external law firm, with HSBC's own
data privacy experts in attendance.
The event covered privacy-related
developments likely to have the greatest impact across the Group.
Key themes included upcoming data privacy reforms in the UK and the
implications for global organisations, and trends in enforcement of
data privacy laws and regulations. We also reviewed the impact,
successes and challenges of General Data Protection Regulation
('GDPR') implementation globally.
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The ethical use of data and
AI
Artificial intelligence and other
emerging technologies provide the opportunity to process and
analyse data at a depth and breadth not previously possible. While
these technologies offer significant potential benefits for our
customers, they also pose potential ethical risks for the financial
services industry and society as a whole. We have a set of
principles to help ensure we consider and address the ethical
issues that could arise. HSBC's Principles for the Ethical Use of
Data and Artificial Intelligence are available at
www.hsbc.com/who-we-are/esg-and-responsible-business/our-conduct.
We continue to develop and enhance
our approach to, and oversight of, AI, taking into consideration
the fast-evolving regulatory landscape, market developments and
best practice.
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The threat of cyber-attacks remains
a concern for our organisation, as it does across the financial
sector and other industries. As cyber-attacks continue to evolve,
failure to protect our operations may result in the loss of
sensitive data, disruption for our customers and our business, or
financial loss. This could have a negative impact on our customers
and our reputation, among other risks.
We continue to monitor ongoing
geopolitical events and changes to the cyber threat landscape and
take proactive measures with the aim to reduce any impact to our
customers.
Prevent, detect and mitigate
We invest in business and technical
controls to help prevent, detect and mitigate cyber threats. Our
cybersecurity controls follow a 'defence in depth' approach, making
use of multiple security layers, recognising the complexity of our
environment. Our ability to detect and respond to attacks through
round-the-clock security operations centre capabilities is intended
to help reduce the impact of attacks.
We have a cyber intelligence and
threat analysis team, which proactively collects and analyses
internal and external cyber information to continuously evaluate
threat levels for the most prevalent attack types and their
potential outcomes. We actively participate in the broader cyber
intelligence community, including by sharing technical expertise in
investigations, alongside others in the financial services industry
and government agencies around the world.
In 2023, we further strengthened our
cyber defences and enhanced our cybersecurity capabilities with the
objective to help reduce the likelihood and impact of unauthorised
access, security vulnerabilities being exploited, data leakage,
third-party security exposure, and advanced malware. These defences
build upon a proactive data analytical approach to help identify
advanced targeted threats and malicious behaviour.
We work with our third parties,
including suppliers, financial infrastructure bodies and other
non-traditional third parties, in an effort to help reduce the
threat of cyber-attacks impacting our business services.
We have a third-party security risk
management process in place to assess, identify and manage the
risks associated with cybersecurity threats with supplier and other
third-party relationships. The process includes risk-based
cybersecurity due diligence reviews that assess third parties'
cybersecurity programmes against our standards and
requirements.
Policy and governance
We have a robust suite of
cybersecurity policies, procedures and key controls designed to
help ensure that the organisation is well managed, with effective
oversight and control. This includes but is not limited to defined
information security responsibilities for employees, contractors
and third parties, as well as standard procedures for cyber
incident identification, investigation, mitigation and
reporting.
We operate a three lines of defence
model, aligned to the enterprise risk management framework, to help
ensure oversight and challenge of our cybersecurity capabilities
and priorities. In the first line of defence, we have risk owners
within global businesses and functions who are accountable for
identifying and managing cyber risk. They work with cybersecurity
control owners to apply the appropriate risk treatment in line with
our risk appetite. Our controls are designed to be executed in line
with our policies and are reviewed and challenged by our risk
stewards representing the second line of defence. They are
independently assured by the Global Internal Audit function, the
third line of defence. The assessment and management of our
cybersecurity risk is led and coordinated by a Global Chief
Information Security Officer, who has extensive experience in
financial services, security and resilience, as well as in
strategy, governance, risk management and regulatory compliance.
The Global Chief Information Security Officer is supported by
regional and business level chief information security officers. In
the event of incidents, the Global Chief Information Security
Officer and relevant supporting officers are informed by our
security operations team and are engaged in alignment with our
cybersecurity incident response protocols.
Key performance indicators, control
effectiveness and other matters related to cybersecurity, including
significant cyber incidents, are presented on a regular basis to
various management risk and control committees including to the
Board, the Group Risk Management Meeting and across global
businesses, functions and regions. This is done to ensure ongoing
awareness and management of our cybersecurity position.
Our cybersecurity capabilities are
regularly assessed against the National Institute of Standards and
Technology framework by independent third parties, and we
proactively collaborate with regulators to participate in regular
testing activities. HSBC also engages external independent third
parties to support our penetration and threat-led penetration
testing, which help to identify vulnerabilities to cyber threats
and test security resilience.
Cyber training and awareness
We understand the important role our
people play in protecting against cybersecurity threats. Our aim is
to equip every colleague with the appropriate tools and behaviours
they need to keep our organisation and customers' data safe. We
provide cybersecurity training and awareness to our people, ranging
from our top executives to IT developers to front-line relationship
managers around the world.
Over 94% of our IT developers hold
at least one of our enhanced security certifications to help ensure
we build secure systems and products.
We host an annual Cyber Awareness
Month for all colleagues, covering topics such as online safety at
home, social media safety, safe hybrid working, and cyber incidents
and response. Our dedicated cybersecurity training and awareness
team provides a wide range of education and guidance to both
customers and our colleagues about how to identify and prevent
online fraud.
Over 99%
Employees completed mandatory
cybersecurity training on time.
Over 94%
IT developers hold at least one of
our internal secure developer certifications.
Over 90
Cybersecurity education events were
held globally.
Over 96%
Of survey respondents to
cybersecurity education events said they have a better
understanding of cybersecurity following these events.