HSBC is voting on stopping funding coal? about time, but not action for 19 years

Over the last few years it has become increasingly clear that conservationists approach to fossil fuel companies were not working.

The problem is that there is a great deal of money to be made from fossil fuels. Companies like tesla hint at a world where this ceases to be the case, and the speed that the electric car market is growing, is incredibly fast. Indeed many people have commented on the fact that the growth curve of electric cars is clearly following the curve of many other disruptions from computers to mobile phones.

The problem is that if the world is going to avoid the worst impacts of global warming, we need to leave much of the fossil fuels in the ground. Given all this what can be done?

Well, one of the new concentrations has been on funding. Deep coal mines, oil wells particularly sea based oil rigs (forget deep sea) is around $650 million. As such, these companies use many financial tools, from borrowing to share and insurance. Without these protections drilling an oil rig would in most cases be far too dangerous a financial investment for any one firm.

As such, increasing amounts of pressure has been placed on the providers of these services. Quite rightly, it is publicized that a bank cannot claim to have a low carbon footprint if it is funding oil or gas extraction.

HSBC has tabled a vote to its shareholders about phasing out financing of coal. Now there are several things that need to be considered. They are only intending to complete this phase out by 2040, 19 years from now. Further more a loan given in the year 2039 might last 25 years (perhaps more). So what they are suggesting, is that if 3 in 4 of their shareholders (why is it not a simple majority?) vote for stopping financing coal extraction , they will stop doing new deals in 19 years and their last funded project will be some number of years after this.

This is clearly way to slow. Will HSBC feel it has done what it needs to if the shareholders agree? Where is the leadership? Many countries are aiming for dramatic cuts to carbon emissions by 2030, something that they wont achieve if they continue to burn coal.

So clearly, while this is a good first step, it does not go far enough. I know that they wish to be good partners to the companies they fund, but 19 years warning is too much. It is quite reasonable as a lender, to give 5 years warning that you will no longer funding work of this kind. It is possible that they are trying to get the shareholders on side, however I believe that customers will start showing their disapproval over this.

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