Our progress towards net zero targets
Supporting the transition to net zero is a key priority for HSBC. We believe the transition to net zero will help make the global economy stronger and more resilient against mounting climate impacts. In October 2020, we announced our ambition to become a net zero bank by 2050. We believe supporting our customers’ transition both benefits their business and helps generate long-term financial returns for our shareholders.
Since we set our net zero ambition, collective global efforts have driven progress in some vital areas of the decarbonisation challenge. Billions of dollars have been allocated to clean energy. Falling costs of renewables and advancements in clean technologies have accelerated their adoption. And while it is taking time for more nascent industries such as hydrogen, carbon capture and storage and sustainable aviation fuel to scale, with supportive government policies and industrial strategies their adoption can be accelerated and their costs reduced.
We have always recognised that the transition would not be linear. Yet while the transition has progressed, the global pace of change remains insufficient. As the UN’s latest Emission Gap report recently warned, current government policies, conventional energy demand, clean technology adoption, and wider consumption patterns are not yet aligned with the Paris Agreement goal of holding the temperature increase to well below 2C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5C above pre-industrial levels.
As a bank, our ability to finance our customers’ transition and, in turn, progress toward and meet our targets, relies on decarbonisation solutions scaling across sectors, alongside growing demand from our customers for capital to transition their business models. Ambitious and credible governmental policy measures also remain fundamental prerequisites for decarbonising the real economy at sufficient pace. We are limited by, and cannot on our own overcome, the present lag in policy measures and the overall slower pace of the transition. These factors put our customers’, and our own, net zero ambitions at risk.
In our net zero transition plan published in January 2024, we committed to continually calibrate our approach to take into consideration the latest scientific methodologies, climate-related policy measures and developments in the real world given that our sector portfolios reflect progress in the real economy in the regions where we operate. As we near the mid-point towards our 2030 targets, it is important to take stock of our own progress so far. We have made good progress in reducing the emissions from our own operations but more uneven progress towards our ambitions for our financed emissions footprint.
Net zero in our own operations, business travel and supply chain
In 2020, we set an ambition to reach net zero in our operations and supply chain by 2030 and we continue to make good progress in driving down our direct emissions, which are largely derived from energy consumption. We are currently on track to achieve a reduction in our scope 1 and 2 emissions of more than 90 per cent by 2030 compared with our 2019 baseline, through a program of energy efficiency initiatives and significant investment in renewable power. However, progress in reducing emissions in the scope 3 supply chain component is proving slower than we anticipated, driven mainly by the slower pace of the transition across the real economy.
It has become clear that we would need to rely heavily on carbon offsets to achieve net zero in our own operations and supply chain by 2030. This approach would not be aligned with recently updated guidance from the Science Based Targets Initiative on the role of offsets in meeting corporate net zero claims. As such, we have revisited this ambition to take into account latest best practice guidance. We are now focused on cutting emissions across our operations, travel and supply chain to achieve net zero by 2050.
We expect to continue to report on our progress up to 2030 and beyond. Presently, across our operations, business travel and supply chain, we expect to achieve a reduction of around 40 per cent in emissions by 2030.
Interim financed emissions targets
Our strategy is to support emission reductions in the wider economy by working with our portfolio of customers to facilitate the emission reductions they are seeking to make. That is what we consider when setting financed emissions targets. To the extent our customers are facing challenges, especially in light of the slower pace of the transition, there is no real benefit to society in simply sending those customers to another organisation that may be less committed to supporting their transition.
As such, we are supporting both new and existing customers that are making positive steps to transition to a net zero economy. We continue to focus on engaging with our customers on their transition plans, considering our strategic business lines and markets, managing the products and services we offer, and adapting the financing choices we make to help move the world towards a resilient, net zero economy.
However, as we have set out in our net zero transition plan, we must acknowledge that our influence on the decarbonisation of individual companies and the industries and economies in which our customers operate has limits. There are fundamental prerequisites, outside of our control, which impact our ability to meet our 2030 interim financed emissions targets and ultimately reach our net zero ambition. These include technological advancements, diversification of the energy mix, market demand for climate solutions, evolving customer preferences, and government leadership and effective policy.
At the current pace of decarbonisation, a combination of the above factors has led to the transition being slower than envisaged by recent Paris-aligned net zero scenarios. Moreover, certain high emitting sectors are not yet currently on a 1.5C pathway. Until the real economy makes significant progress in decarbonising, our own progress towards our 2030 targets and 2050 net zero ambition will be constrained.
Against this background, we have begun a review of our interim financed emissions targets and associated policies as part of the annual review of our net zero transition plan that we referenced in our 3Q earnings release in October 2024. This analysis is complex: it presents considerable data and methodology challenges and it is going to take time to complete.
As we calibrate our approach for the latest context, we will seek to balance being ambitious on net zero while recognising present near-term global challenges, and the associated impact of the transition playing out differently across the regions and sectors we serve. In doing so we plan to draw on the latest scientific evidence and credible industry-specific pathways while, at the same time, maintaining our commitment under our 2021 Climate Resolution.
More detail on our approach to the net zero transition is set out in our Annual Report and Accounts (PDF, 8.34MB).