HSBC lowers ESG weighting in executive pay and delays net zero target by 20 years

HSBC has delayed a 2030 goal to achieve net zero emissions in its operations and supply chain to 2050 and reduced the weighting of environmental KPIs in its executive incentive scheme.

The bank says it is on track to reduce Scope 1 and 2 emissions by more than 90% by 2030, but has faced challenges in reducing supply chain emissions due to the “slower pace of the transition across the real economy”.

As a result, HSBC is now aiming to reduce these emissions by just 40% by 2030, and achieve net zero emissions across its operations and supply chain by 2050. This is the same timeframe as for financed emissions – though the bank has also begun a review of the interim emissions reduction goals it has set for some of the sectors it finances, meaning this deadline could change too.

“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,” the bank said in its annual report.

HSBC governance changes suggest lower focus on sustainability

The move comes at a time when HSBC’s commitment to tackling the climate crisis is already being questioned. In October – a month after appointing George Elhedery as its new CEO – the bank demoted its then Chief Sustainability Officer, Celine Herweijer, from the executive committee.

A few short weeks later, Herweijer (who came from 12 years leading PwC’s sustainability practice) announced her departure from the bank, and was replaced by Julian Wentzel, a seasoned banking executive with little sustainability experience.

Now, the bank has changed the structure of its executive pay incentive scheme for the 2025 to 2027 period, reducing the weighting of environmental measures from 25% to 20%, and increasing pressure on its leaders to achieve equity and shareholder returns.

“This ensures a greater proportion of the scorecard is aligned to value creation while supporting our ESG ambitions,” the annual report says.

Banking sector reducing climate ambition

HSBC is not the only global bank to retreat from climate ambition in recent months: at least 11 US, Canadian and Australian banks have exited the Net Zero Banking Alliance (NZBA), and several have also lost their top sustainability leaders, not always replacing them.

The NZBA’s umbrella organisation, the Glasgow Financial Alliance for Net Zero (GFANZ) also updated its mandate in recent months, moving away from requiring members to set strict targets and adopting a looser climate finance collaboration mandate.