HSBC Holdings plc – Annual report – 31 December 2021
Industry: banking
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.
Where we have not included climate-related financial disclosures consistent with all of the TCFD Recommendations and Recommended Disclosures, the reasons for this and steps we are taking are set out in the additional information section on page 402.
Additional information (page 402 extract)
TCFD recommendations and recommended disclosures
As noted on page 19, we have considered our ‘comply or explain’ obligation under the FCA’s Listing Rules, and confirm that we have made disclosures consistent with the TCFD Recommendations and Recommended Disclosures in this Annual Report and Accounts 2021 save for certain items, which we describe below:
Targets setting
Metrics and targets (c) relating to short-term targets: Given that climate scenarios are mainly focused on medium- to long-term horizons, rather than short term, we have set interim 2030 targets for on-balance sheet financed emissions for the oil and gas, and power and utilities sectors. HSBC intends to review the financed emissions baseline and targets annually, where relevant, to help ensure that they are aligned with market practice and current climate science.
Impacts on financial planning and performance
Strategy (b) relating to financial planning and performance: We do not currently fully disclose the impacts of climate-related issues on financial planning, how these serve as an input to the financial planning process, the impact of climate-related issues on our financial performance (for example, revenues and costs) and financial position (for example, assets and liabilities), in each case due to transitional challenges including data and system limitations.
Metrics and targets (a) relating to internal carbon prices and climate-related opportunities metrics: We do not currently fully disclose the proportion of revenue or proportion of assets, or other business activities aligned with climate-related opportunities, including revenue from products and services, forward-looking metrics consistent with our business or strategic planning time horizons, or internal carbon prices, in each case due to transitional challenges including data and system limitations.
We expect the data and system limitations related to financial planning and performance, internal carbon prices and climate-related opportunities metrics to be addressed in the medium term as more reliable data becomes available and technology solutions are implemented.
Impacts of transition and physical risk
Strategy (c) relating to quantitative scenario analysis: 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.
Metrics and targets (a) relating to detailed climate-related risk exposure metrics for retail and wholesale: We do not fully disclose metrics used to assess the impact of climate-related 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, average tenor). This is due to transitional challenges including data limitations.
Metrics and targets (c) on targets related to physical risk: We do not currently disclose targets used to measure and manage physical risk. This is due to transitional challenges including data limitations.
We expect the data limitations related to quantitative scenario analysis, specific risk metrics and physical risk targets to be addressed in the medium term as more reliable data becomes available and technology solutions are implemented.
Scope 3 emissions disclosure
Metrics and targets (b) relating to scope 3 emissions metrics: We currently disclose partial scope 3 greenhouse gas emissions including business travel and financed emissions. In relation to financed emissions, we are disclosing scope 3 greenhouse gas emissions for the oil and gas, and the power and utilities sectors. Future disclosure on scope 3 financed emissions (customers) and supply chain emissions (suppliers), and related risks is reliant on both our customers and suppliers publicly disclosing their carbon emissions and related risks. We aim to disclose financed emissions for additional sectors by 2023.
Our approach to disclosure of financed emissions for additional sectors can be found on: www.hsbc.com/who-we-are/esg-andresponsible-business/esg-reporting-centre.
Other matters
Strategy (b) relating to acquisitions/divestments and access to capital: We have considered the impact of climate-related issues on our businesses, strategy, and financial planning, but not specifically in relation to acquisitions/divestments or access to capital. Due to transitional challenges such as process limitations, we do not disclose the climate-related impact in these areas. We will aim to further enhance our processes in relation to acquisitions/divestments and access to capital in the medium term.
Metrics and targets (c) relating to water usage target: 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.
With respect to our obligations under LR9.8.6R(8) of the FCA’s Listing Rules, as part of considering what to measure and publicly report, we perform an assessment to ascertain the appropriate level of detail to be included in the climate-related financial disclosures that are set out in our Annual Report and Accounts. Our assessment takes into account factors such as the level of our exposure to climate-related risks and opportunities, the scope and objectives of our climate-related strategy, transitional challenges, and the nature, size and complexity of our business. See ‘How we decide what to measure’ on page 44 for further information.
ESG review | Our approach to ESG (extract page 44)
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 review. We use the information they provide us with to identify the issues that are most important to them and consequently also matter to our own business.
Our ESG Committee (previously the ESG Steering 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 27 to The Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited), 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. We are also informed by stock exchange listing and disclosure rules globally. We know that what is important to our stakeholders evolves over time and we plan to continue to assess our approach to ensure we remain relevant in what we measure and publicly report.
Recognising the need for a consistent and global set of ESG metrics, we started to report against the core World Economic Forum (‘WEF’) ‘Stakeholder Capitalism Metrics’ within the Annual Report and Accounts 2021 for the first time.
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 the ESG data in general, we are on a continuous journey to ensure completeness and robustness.
For further information on our approach to reporting, see the ‘Additional information’ section on page 401.
Additional information (page 401 extract)
Approach to ESG reporting
The information set out in the ESG review on pages 42 to 88, taken together with other information relating to ESG issues included in this Annual Report and Accounts 2021, aims to provide key ESG information and data relevant to our operations for the year ended 31 December 2021. The data is compiled for the financial year 1 January to 31 December 2021 unless otherwise specified. Measurement techniques and calculations are explained next to data tables where necessary. There are no significant changes from the previous reporting period in terms of scope, boundary or measurement of our reporting of ESG matters. Where relevant, rationale is provided for any restatement of information or data that has been previously published. We have also considered our obligations under the Environmental, Social and Governance Reporting Guide contained in Appendix 27 to The Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (‘ESG Guide’) and under LR9.8.6R(8) of the Financial Conduct Authority’s (‘FCA’) Listing Rules. We will continue to develop and refine our reporting and disclosures on ESG matters in line with feedback received from our investors and other stakeholders, and in view of our obligations under the ESG Guide and the FCA’s Listing Rules.
ESG Guide
We comply with the ‘comply or explain’ provisions in the ESG Guide, save for certain items, which we describe in more detail below:
- A1(b) on relevant laws/regulations relating to air and greenhouse gas emissions, discharges into water and land, and generation of hazardous and non-hazardous waste: Taking into account the nature of our business, we do not believe that there are relevant laws and regulations in these areas that have significant impacts on HSBC.
- A1.3 on total hazardous waste produced, A1.4 on total non-hazardous waste produced: Taking into account the nature of our business, we do not consider hazardous waste to be a material issue for our stakeholders. As such, we report only on total waste produced, which includes hazardous and non-hazardous waste.
- A1.6 on handling hazardous and non-hazardous waste: Taking into account the nature of our business, we do not consider this to be a material issue for our stakeholders. Notwithstanding this, we continue to focus on the reduction and recycling of all waste. Building on the success of our previous operational environmental strategy, we are identifying key opportunities where we can lessen our wider environmental impact, including waste management. For further details, please see our ESG review on page 51.
- A2.4 on sourcing water issue: Taking into account the nature of our business, we do not consider this to be a material issue for our stakeholders. Notwithstanding this, we have implemented measures to further reduce water consumption through the installation of flow restrictors, auto-taps and low or zero flush sanitary fittings and continue to track our water consumption.
- A2.5 on packaging material, B2.2 on lost days due to work injury, B6(b) on issues related to health and safety and labelling relating to products and services provided, B6.1 on percentage of total products sold or shipped subject to recalls for safety and health reasons and B6.4 in recall procedures: Taking into account the nature of our business, we do not consider these to be material issues for our stakeholders.
This is aligned with the materiality reporting principle that is set out in the ESG Guide. See ‘How we decide what to measure’ on page 44 for further information on how we determine what matters are material to our stakeholders.
Accounts examples 