# Net Zero Transition Plan 2024
HSBC Opening up a world of opportunity
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# Contents
3 Group Chief Executive foreword
4 Understanding our net zero transition plan
## Vision and strategic approach
8 Our vision and strategic approach
14 Our approach to sector transitions
19 Our approach to implementation
## Sector transitions
21 Energy supply
26 Transport
26 Automotive
29 Aviation
32 Shipping
34 Heavy industry
34 Cement
37 Chemicals
39 Iron, steel and aluminium
42 Mining
45 Real estate
48 Food, forests and other land use
## Implementation plan
52 Supporting our customers
64 Embedding net zero into the way we operate
64 Managing risk in transition to net zero
70 Using policies to drive change
73 Integrating net zero into transaction and portfolio decision-making
75 Achieving net zero in our own operations
77 Aligning responsibilities and incentives
79 Strengthening our culture and net zero capabilities
84 Measuring progress
90 Partnering for systemic change
## Additional information
95 Cautionary Statement
97 Endnotes
**Certain defined terms**
Unless the context requires otherwise, ‘HSBC Holdings’ means HSBC Holdings plc and ‘HSBC’, the ‘Group’, ‘we’, ‘us’ and ‘our’ refer to HSBC Holdings together with its subsidiaries. Within this document the Hong Kong Special Administrative Region of the People’s Republic of China is referred to as ‘Hong Kong’. The abbreviations ‘$m’, ‘$bn’ and ‘$tn’ represent millions, billions (thousands of millions) and trillions of US dollars, respectively.
HSBC Holdings plc Net Zero Transition Plan
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# Group Chief Executive foreword
Tackling climate change is one of the most urgent and complex challenges facing humanity.
The key question the world faces is how to deliver the wholesale economic transformation required to limit global warming to 1.5°C, at the speed and scale that is needed. A challenge compounded by the need to, in tandem, address wider societal challenges to deliver inclusive economic growth and protect and restore nature and biodiversity.
As one of the world’s largest international banks – which has supported much of the world’s industrial base for more than 155 years and is present in the regions and sectors where the most significant change is needed – HSBC is well placed to help support and finance the transformation. We also see significant commercial opportunities in helping to finance the new economy, transition to a new type of sustainable economic growth, and create a more secure and resilient planet.
We recognise that our history brings with it an unavoidable starting point – a portfolio today with a heavy financed emissions footprint. In 2020, we set an ambition to become a net zero bank by 2050. Since then, we have made progress in support of this ambition – including providing and facilitating sustainable finance and investment for our clients, updating key financing policies, investing in the scaling up of emerging climate technologies and setting 2030 targets for financed emissions in a range of high-emitting sectors. While there is much more to do, we are bringing all this work together to provide an overview of the actions being taken and planned to embed our net zero ambition across HSBC in our first net zero transition plan.
Our motivation to act is threefold: (1) to seize the significant economic opportunity that exists in financing the investment needs of our customers in the transition, while helping them to prosper; (2) to help mitigate the rising financial and wider societal risks associated with failing to achieve the required transition across industries and geographies; and (3) to help shape (not just follow) the understanding, policies, market structures and standards necessary to achieve a just transition while maintaining sound economies.
Our first net zero transition plan is an important milestone in our journey to achieving our net zero ambition. Our aim is to help our people, customers, investors and other stakeholders to understand our long-term vision, the challenges and dependencies that exist, and the progress we are making in our own transition. We also want to demonstrate how we intend to harness our strengths and capabilities in the areas where we believe we can best support large-scale emissions reductions: transitioning industry, catalysing the new economy, and decarbonising trade and supply chains.
Achieving net zero will require change in every sector of the economy. A key mechanism for driving this change will be the development and implementation of viable transition plans within all sectors. The existence of these transition plans will help companies mobilise the support necessary from their suppliers, customers, investors, bankers and governments, as well as from within their own organisations. The plans can outline the practical steps, options, dependencies and risks a company faces to decarbonise its business model, manage risks, and seize opportunities from the transition.
The radical change in the shape of many industries required by net zero cannot be achieved by any one organisation or part of the financial system alone. Our own ability to become a net zero bank by 2050 is dependent on the pace of decarbonisation in the real economy and on our customers’ ability to transition their business models. Our customers are themselves dependent on the scaling of new technologies and on the policies that support this. Ultimately, as a bank, our transition plan is the aggregation of our customers’ transition plans, which is why our approach is based on working with our customers. In addition to our corporate and public sector customers, we also aim to work with our retail customers, who will need to adopt new sustainable solutions at scale if we are to meet our ambition.
In the years ahead, the science, methodologies and data we use to set our targets, inform our policies and measure our progress will all need to continue to evolve. It is imperative we have an iterative approach, guided by industry standards, that keeps up-to-date with real economy progress on decarbonisation across the sectors and geographies we serve. This will be impacted by fiscal and regulatory policy development, as well as the uptake of new business models and emerging technologies we need to reach net zero.
All of this means that our own approach – including our transition plan itself – will continue to evolve. We will need to regularly reassess our progress openly, transparently and in conjunction with our stakeholders – with a belief that future iterations of our transition plan can continue to build upon the last one.
HSBC has succeeded for more than 155 years because we have acted in the long-term interests of our clients, our people and the communities we serve. Today, we must help to finance and drive the clean industrial revolution and collaborate globally to help enable change at scale. Our first net zero transition plan explains how we are working to do this – and playing our part in working towards a net zero future.
**Noel Quinn**
Group Chief Executive
25 January 2024
> As one of the world’s largest international banks, HSBC is well placed to help support and finance the economic transformation required to limit global warming to 1.5°C.
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# Understanding our net zero transition plan
Founded in 1865, HSBC is one of the largest banking and financial service organisations in the world. In delivering on our purpose – opening up a world of opportunity – we bring together the people, ideas, and capital that nurture progress and growth, for our customers, our people, our investors and our communities.
## The net zero imperative
Many of the financial and economic risks posed by climate change, as well as some of the measures necessary to mitigate it, are readily apparent.
There is a need to accelerate progress on the transition to a net zero global economy to try to limit global warming to 1.5°C: the threshold for a safe climate according to the Intergovernmental Panel on Climate Change,$^1$ endorsed both by the global scientific community and through the Paris Agreement. So far approximately 150 countries have announced net zero targets, as well as many regions, cities and companies.$^2$ However, even if today’s pledges are implemented in full there is still an emissions gap to get on track for 1.5°C if we and society at large are to achieve our shared goals.$^3$
If the world is to achieve 1.5°C, strong action is needed to enhance and operationalise net zero pledges. The transition itself will bring new risks and uncertainties, which need to be carefully managed. These range from energy security and risks related to new critical and volatile supply chains, through to the impact of transition policies and regulations on credit risk or forward-looking asset prices, technology risks or corporate liability risks.
For economies to decarbonise while still serving the social and economic needs of countries, businesses across all industrial sectors will need to find and invest in alternative technological solutions and business practices to lower their greenhouse gas emissions, and consumers will need to adopt the ensuing new solutions at scale.
Industrial transformation on this scale will require significant investment over the next 20 to 30 years. Such investment will require unprecedented cooperation between public sector finance and private sector finance. The shape, speed and overall costs of the transition in a country or in the global economy will be heavily determined by government policy, which itself can help propel innovation and investment. Addressing climate change will not be easy, but both the risks of inaction and the scale of opportunity are significant.
## Our net zero journey so far
In October 2020 we announced our ambition to become a net zero bank by 2050. In 2021, we included the transition to net zero as one of the four key pillars of our corporate strategy. In May 2021 we also passed a resolution on climate change that had the backing of 99.71% of our shareholders. It was based on a core aim to support our customers in their transition to net zero and to a science-based strategy, with interim targets on a sector-by-sector basis consistent with achieving net zero by 2050. Since 2020, we have taken a number of steps to begin to execute on our net zero ambition and manage our climate risks.
As a global universal bank that serves over 40 million customers across 62 countries and territories, with millions of transactions each year, a top-down approach to making progress is critical.
This means focusing our efforts on where we can help drive material and implementable change, and applying learnings as we work to embed net zero and climate risk management across the Group. It means focusing first on the sectors and customers with the highest emissions and transition risks. It means using materiality to guide how we set our sectoral 2030 targets, where we apply our policies, where we prioritise customer transition plan engagement, where we direct transition finance and investment, and how we report on relevant exposures. It means using a risk based, proportionate and iterative approach to how we work to embed net zero into our organisation over time.
```mermaid
timeline
title Highlights from our net zero journey since October 2020
2021 : Set ambition to be a net zero bank by 2050, including our portfolio of financed emissions
: Set ambition to be net zero in own operations and supply chain by 2030
: Set ambition to provide and facilitate between $750bn – $1tn of sustainable finance and investment by 2030
: Launched $100m five-year Climate Solutions Partnership
: Made the transition to net zero a key pillar of the Group corporate strategy
: Became a member of the Net Zero Banking Alliance and Net Zero Asset Managers Initiative
2022 : Climate resolution presented to and supported by shareholders at AGM
: Published net zero-aligned Group thermal coal phase-out policy
: Set on-balance sheet 2030 financed emissions targets for oil and gas, and power and utilities
: Published Statement on Nature
: $650m raised for natural capital funds by Climate Asset Management
: Achieved $210.7bn of our sustainable finance and investment ambition over 2020-2022
: Launched our customer transition plan assessment programme
: Initiated support for the Just Energy Transitions Partnerships in Indonesia and Vietnam
2023 : Published net zero-aligned Group energy policy
: Set on-balance sheet 2030 financed emissions target for thermal coal mining
: Set on-balance sheet 2030 financed emissions targets for key transport and heavy industry sectors
: Established a 3-year, bank-wide, internal sustainability transformation programme
2024 : Published initial Net Zero Transition Plan
: Became a founding funder of the Just Transition Finance Lab, hosted at LSE’s Grantham Research Institute
: Became a founding member of the Global Climate Finance Centre and the Capacity-building Alliance of Sustainable Investment
```
***
# Our net zero transition plan
We have prepared our net zero transition plan to provide an overview of our approach to net zero and the actions we are taking to help meet our ambition. 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 uncertainties and dependencies.
Our transition plan covers the HSBC Group. For the purposes of our first transition plan we have focused primarily on the sectors and customers where we would anticipate making the most significant impact on emissions reductions. We have highlighted where a tailored approach is being taken by individual business lines, for example HSBC Asset Management’s separate policies and targets, in response to their own obligations and regulatory requirements.
The plan is organised into three sections: vision and strategic approach, sector transitions and implementation plan.
1. **Vision and strategic approach** – sets out our vision for financing the transition to net zero. It outlines how we intend to use our strengths to make the financing, facilitation and investment choices that can have a meaningful impact on decarbonisation in the real economy, as well as the principles we aim to use to help guide this approach.
In this section we provide an overview of our approach to sector transitions, including how we seek to use sector pathways to engage with customers on the future of their industries. It includes our approach to setting and evolving our sectoral financed emissions targets and making progress towards them.
We introduce the key elements of our implementation plan, which we structure around how we aim to support our customers, embed net zero into the way that we operate as an organisation, and partner for systemic change.
2. **Sector transitions** – looks at the expected transition in the following key economic sectors: energy supply (which includes oil and gas and power and utilities); automotives; aviation; shipping; cement; chemicals; iron, steel and aluminium; mining; real estate (including commercial and residential); and food, forests and other land use. For each we describe the technologies, investment needs and external dependencies that, based on current understanding, are needed to make a net zero by 2050 pathway viable, and where a 1.5°C-aligned 2030 pathway is most at risk. We also outline our related portfolio and our aims and targets, where applicable, and the actions we are taking to support sector decarbonisation.
3. **Implementation plan** – provides details of how we are working to embed net zero across key areas of our organisation to help ensure that we can play a role in enabling the transition to net zero in the markets we serve. Our implementation plan sets out how we have begun to embed net zero: into the way that we support our customers, both through customer engagement and the provision of financing solutions; into the way that we operate as an organisation, including risk management, policies, governance and own operations; and into how we partner externally in support of systemic change.
## Uncertainties and dependencies
The most significant challenge in developing a transition plan at this early stage is the relative novelty of the process and the uncertainty in many of the areas we are seeking to address. This includes evolving science, methodologies, scenario analysis and industry standards, challenges on data quality and availability, and the need to build data sets and reporting infrastructure for types of data that financial institutions historically have not gathered. It includes the pace of technology evolution, which varies dramatically from industry to industry, and is heavily reliant on the emergence of a supportive regulatory and fiscal policy environment. Economic and geopolitical events will also continue to have an impact. The only certainty is that these and other developing areas will unfold in ways that we cannot accurately forecast today. As a result, the ambition and details around implementation in this transition plan will need to evolve over time. Rather than wait for these areas to become clear and for our monitoring and reporting infrastructure to further develop, we have chosen to lay out and pursue the plans we have today, based on currently available data, infrastructure, resources, technologies and standards.
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.
### Overview of our approach to net zero
| Our net zero strengths | Transitioning industry | Catalysing the new economy | Decarbonising trade and supply chains |
| :--- | :--- | :--- | :--- |
| **Our implementation plan** | Supporting our customers | Embedding net zero into the way we operate | Partnering for systemic change |
| **Our net zero principles** | Science-based, transparent and accountable | Integrating nature | Just and inclusive |
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# Vision and strategic approach
## Our role in the transition
Responding to the challenge and opportunity presented by net zero requires us to work across HSBC to implement and embed our transition plan, to manage associated risks and to help sustain and grow value for our customers, our shareholders and our wider stakeholders over the decades ahead.
### An opportunity to make an impact
We want to make financing, facilitating and investment choices that can have a meaningful impact on emissions reduction in the real economy, not just 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, rather than simply divesting in the short term to help meet our own portfolio financed emissions targets.
For over 155 years HSBC has supported the economic development of energy, industry and entrepreneurs, from east to west. We can now help support clean industrial development and new economy entrepreneurs.
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. Our customers are the power producers that will power Asia’s growing population, the energy companies and miners at the heart of future global energy value chains, the steel and cement makers, and the retailers or transport and logistics companies critical to global supply chains.
This footprint means we will naturally have a challenging and complex transition, with countries and actors 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.
Rapid change will require unprecedented levels of investment across industries as the world transitions away from the use of unabated fossil fuels and invests in the sectors and technologies of the net zero economy. Third-party analysis of publicly available 1.5ºC-aligned scenarios suggests an order of magnitude estimate of $155 trillion is needed to finance the transition to net zero by 2050 in the markets HSBC serves, of which $39 trillion is estimated to be required by 2030.$^4$ Further analysis indicates that around 40 to 50 per cent of corporate capital expenditure by 2030 will be directly linked to the transition, funding the new technologies and low-carbon infrastructure vital to the industries of the future.$^5$
Failure by society to respond to climate change creates potential systemic risk to the financial sector. Today’s macroprudential regulators are increasingly focused on the resilience of the financial system to climate risks – both physical and transition. Recognising this, we are working to address the climate risks in our portfolio and business model, and to support our clients and help finance the transition at scale in the real economy.
> Third-party analysis estimates
> # $155tn
> is needed to finance the transition to net zero by 2050 in the markets HSBC serves.$^6$
***
# Integrating nature
The finance sector can help to counter the decline in biodiversity, scaling up nature-related finance, implementing policies to help eliminate commodity-driven deforestation, and investing in the sustainable food and agricultural systems needed for net zero. To get this right, we will need to embed nature considerations alongside net zero.
Nature and climate go hand in hand. Nature-based solutions will play an important role in removing carbon from the atmosphere. These methods include conserving and restoring natural ecosystems and managing forests and agricultural lands more sustainably. Such solutions can also help counter key drivers of the biodiversity loss currently underway, and support action to tackle wider drivers of nature loss, including deforestation, over-fishing and waste.
We are at an early stage, but our outline approach to incorporating nature considerations is shown to the right. This includes considering how to: manage nature risks; embed nature into decision-making and corporate customer engagement; finance and invest in nature-related solutions; manage our impacts on nature; and partner for systemic change. As we continue to consider how we embed nature alongside net zero, it is our intention to develop an appropriate framework for nature. Further details of specific nature-related initiatives can be found in our Implementation Plan from page 51.
## Our outline approach to incorporating nature considerations
1. **Managing nature risks**
We are working to address nature-related issues through our sustainability risk policies and risk management process, including through:
- Our forestry policy and agricultural commodities policy, which require customers involved with major deforestation-risk commodities to operate in accordance with sustainable business principles.
- Imposing restrictions, for example through a number of our sectoral policies, on certain financing activities in environmentally and socially critical areas.
- Piloting the Taskforce on Nature-related Financial Disclosure (TNFD) beta framework to better understand our exposure to nature-related risks, including on subsets of customers.
See *Managing risk in transition to net zero* on page 64 and *Using policies to drive change* on page 70
2. **Embedding nature into decision-making and customer engagement**
We are building our understanding of how to effectively embed nature into our decision-making and engagement by:
- Incorporating nature-related considerations (i.e. questions, criteria, etc.) into our corporate customer transition plan assessments and customer engagement.
- Engaging with investee companies on biodiversity and natural resources via HSBC Asset Management.
- Exploring how nature safeguarding mechanisms could be incorporated into decision-making.
See *Sector transitions* on page 20 and *Supporting our customers* on page 52
3. **Financing and investing in nature-related solutions**
We are testing and scaling approaches to investing in biodiversity and nature, including:
- Establishing a $650 million fund focused on nature-based assets, nature-based carbon projects and new forms of natural capital (Climate Asset Management, a joint venture between HSBC Asset Management and Pollination).
- Providing early-stage finance and investment for products seeking to protect and restore nature through our climate tech venture debt financing.
- Innovating our first biodiversity-screened exchange traded fund.
See *Supporting our customers* on page 52
4. **Managing our impacts on nature**
In our own operations we aim to be a responsible steward and consumer of natural resources, by:
- Striving to ensure that our premises do not adversely affect the environment or natural resources, where possible, particularly in areas subject to water stress.
- Introducing a green leasing programme so that new premises help support natural resource management.
- Aiming to achieve LEED or equivalent certification for construction projects.
See *Achieving net zero in our own operations* on page 75
5. **Partnering for systemic change on nature**
We continue to work to strengthen our partnerships across the public and private sector to help drive action and develop industry practice, including:
- Our Climate Solutions Partnership with the World Resources Institute (WRI) and World Wide Fund for Nature (WWF).
- Partnering with the Sustainable Markets Initiative to build the Terra Carta Accelerator Fund to finance natural capital projects in emerging markets.
See *Sector transitions* on page 20 and *Partnering for systemic change* on page 90
***
# Just and inclusive
A just and inclusive transition means working to avoid people and communities being left behind. We can make efforts to support this in our approach to net zero.
A just transition can take many forms. Communities historically reliant on thermal coal mining or oil production will need financing support to pivot their industries and to retire their assets early. Regions less abundant in clean energy, let alone energy access, must be given time and resources to build clean energy security. Smaller businesses or those in emerging markets will need support tailored to their realities.
We became a signatory to Just and Urgent Energy Transition (JUET) principles at the 2021 United Nations climate change conference (COP26) and we are working on how to embed just transition considerations into our approach to net zero. We are at an early stage, but our outline approach to incorporating just transition considerations is shown to the right. This includes how we are considering this in our policies and decision-making, in how we assess customer transition plans for in-scope customers (see page 54), and how we aim to finance, facilitate and invest in the customers that face the largest constraints to mobilise capital for net zero. As we continue to develop this approach, we intend to work to embed it into our financing decisions.
## Our outline approach to incorporating just transition considerations
1. **Customer engagement**
We are working to embed just transition considerations into our customer engagement by:
- Including just transition considerations within our corporate customer transition plan assessments.
- Providing insights to our customers through research on key topics, including the just transition.
See *Supporting our customers* on page 52
2. **Policies and risk management**
We are starting to address just transition-associated risks through our policies and risk management processes by:
- Integrating just transition considerations when aligning processes, policies and learning.
- Integrating just transition considerations into our thermal coal phase-out and energy policies.
- Applying the Equator Principles to assess and manage the environmental and social risks of relevant projects we finance.
See *Managing risk in transition to net zero* on page 64 and *Using policies to drive change* on page 70
3. **Financing and investing**
We are exploring approaches for helping to support a just transition through our sustainable financing and investing, for example by:
- Supporting SMEs in a just transition through our UK Green SME Fund.
- Participating in collaborative initiatives for blended finance to transition the energy sector, for example through our in involvement in the Just Energy Transition Partnerships in Vietnam and Indonesia.
See *Supporting our customers* on page 52
4. **Partnering for systemic change**
We continue to collaborate to help accelerate wider action by:
- Supporting our own suppliers in their transition, including considering just transition principles.
- Being a founding funder of the Just Transition Finance Lab, hosted at LSE’s Grantham Research Institute, which aims to accelerate solutions to achieve a just transition.
See *Achieving net zero in our own operations* on page 75 and *Partnering for systemic change* on page 90
5. **Governance**
We are working to integrate just transition considerations within relevant corporate governance committees, including by:
- Providing oversight of just transition related aspects of our sustainability risk policies through the Environmental Risk Oversight Forum.
- Providing oversight of the development of our just transition approach through our Sustainability Execution Committee.
See *Aligning responsibilities and incentives* on page 77
***
# Our approach to sector transitions
## The global net zero challenge: decarbonising key sectors
To help provide context for the approach taken in our transition plan and how we will look to support our customers’ transitions, we have set out the key changes that, based on our current understanding, are required for the transition to net zero in key sectors of the global economy.
To reach net zero CO$_2$e emissions globally by 2050, scenarios consistent with limiting the global temperature rise to 1.5°C (with at least 50% probability) suggest the world needs to reduce greenhouse gas (GHG) emissions globally by 7 to 8 per cent each year.$^{12}$ There are many possible paths to achieving net zero by 2050, and each will differ by sector and geography.
Across the global economy, as at 2020, 75 per cent of GHG emissions came from the use of fossil fuels for energy across all sectors, of which energy-use in industry made up 28 per cent, use in buildings 18 per cent, and use in transport 16 per cent (see chart below). A further 15 per cent of global GHG emissions came from agriculture, forestry and other land use (AFOLU), and the remaining emissions came directly from industrial processes (7 per cent) and waste (3 per cent).$^{13}$
Transitioning the global energy system from fossil fuels towards clean energy is therefore vital for the world to reach net zero by 2050. Net zero requires the bulk of energy supply to be based on clean energy, largely renewables, with fossil fuels falling to slightly over one fifth of today’s levels by 2050. In *Energy supply* on page 21, we describe our understanding of the energy supply pathways required for net zero and our intended approach to the key related supply sectors (oil and gas, and power and utilities).
Alongside mass deployment of clean energy, reducing the demand for fossil fuels in industry, buildings, and transport will be key to decarbonising energy. Electrification significantly improves energy efficiency, and clean fuels and advances in materials and technologies are also important. In *Sector transitions* from page 20 onwards, we describe our understanding of the pathways to decarbonise the critical demand sectors – transport, heavy industry and real estate – and our intended approach to supporting the transition of these sectors.
It will be important for supply and demand in the energy market to move concurrently in their decarbonisation to help mitigate potentially severe negative impacts on global economies and societies. Reducing scope 3 emissions of energy supply sectors by phasing down fossil fuel production in line with a 1.5°C-aligned pathway is contingent on the transformation of transport, heavy industry sectors and buildings globally. These industries will need to transform their technology bases to shift demand away from fossil fuels alongside mass deployment of clean energy infrastructure. Both require leaps in technological innovation, strong government support and an unparalleled level of investment into the new technologies, infrastructure and business models that underpin the transition.
Finally, AFOLU contribute directly to around 15 per cent of global GHG emissions. However, if one considers emissions from the agriculture food value chain as a whole (e.g., including retail, packaging, transport and processing emissions), analysis suggests that more than one third of emissions come from the food system.$^{14}$ Nature restoration, and financing the sustainable transformation of food and land use systems, is therefore a key component of reaching net zero.
***
## Sectoral pathway uncertainties, dependencies, and risks
We recognise that there is no precise pathway to net zero and there is a significant amount of uncertainty and complexity associated with the transition. The key decarbonisation themes we have identified, and the technologies behind them, will play out differently across sectors and geographies. Progress in the real economy towards net zero will likely be variable and non-linear and will depend heavily on external factors, including the policy landscape, the speed of technological innovation, and economic and geopolitical events. In addition, climate science and the quality of climate data continues to evolve and the scenarios and assumptions on which we have based our approach may change over time.
While we recognise that we have limited control over wider external events – from geopolitics around the world to major economic shifts – in *Sector transitions* from page 20 onwards, we set out where we intend to focus our efforts to help drive change – as well as current proposals to partner to support wider systems change.
The reality today is that some sectors – such as aviation, shipping or cement – are more at risk of missing 1.5ºC aligned 2030 targets given heavy dependence on nascent technologies. Here it will be critical to monitor progress on technology scaling over the years ahead to 2030. Even where customers have made encouraging 1.5ºC-aligned 2030 commitments, in hard-to-abate sectors there is still a risk of pledges not turning into the necessary emissions reductions or being pared back if technologies don’t scale in time.
The actions we take in the context of progressing towards our own 2030 portfolio targets need to be grounded in impact in the real economy, including emissions impact, commercial impact and socio-economic impact. For example, consolidating a given sector portfolio to a very narrow group of “transition leader” customers may help to deliver a portfolio target, but will fail to deliver real economy emissions impact if the wider industry doesn’t decarbonise. Rather, it will be important to regularly review our sector portfolio progress against how the real-economy is evolving, and chart a path to decarbonising our portfolio while supporting customers who demonstrate credible science-based targets, plans and progress.
In summary, we expect to iterate and mature our approach to supporting sector transitions over time. This includes our approach to financed emissions analysis, targets and portfolio alignment, as well as how to support customers through transition plan engagement, innovate on transition solutions and work with wider stakeholders to help support systemic change.
### Overview of our financed emissions targets and sector transition approach
| Sector | HSBC on-balance sheet 2030 financed emissions targets (versus 2019 baseline)$^a$ | Key transition technologies and strategies | Sector approach |
| :--- | :--- | :--- | :--- |
| **Energy supply** | **Oil and gas**: 34 per cent reduction of absolute financed emissions (Mt CO$_2$e) | - Clean fuels
- Clean electricity
- Carbon capture and storage | page 21 |
| | **Power and utilities**: Emissions intensity of 138 tCO$_2$/GWh | - Clean electricity
- Grid infrastructure improvements (inc. smart grids) and storage
- Thermal coal phase-out
- Storage and flexibility
- Carbon capture and storage | page 21 |
| **Transport** | **Automotive**: Emissions intensity of 66 tCO$_2$/million vkm | - Electric vehicles and smart mobility
- Smart mobility
- Infrastructure
- Public transport improvements | page 26 |
| | **Aviation**: Emissions intensity of 63 tCO$_2$/million rpk | - Sustainable aviation fuels
- Electric, hybrid, and hydrogen-fuelled aircraft
- Improvements to operational and aircraft efficiency
- Route optimisation | page 29 |
| | **Shipping**: No target set; assessing data availability, methodologies and materiality of our portfolio. | - Clean fuels
- Optimising vessel routes
- Improved vessel design
- Clean port infrastructure | page 32 |
| **Heavy industry** | **Cement**: Emissions intensity of 0.46 tCO$_2$/t cement | - Clean electricity
- Clean fuels
- Clinker substitutes
- Carbon capture and storage
- Recycling
- Energy efficiency | page 34 |
| | **Chemicals**: No target set; assessing data availability, methodologies and materiality of our portfolio. | - Alternative feedstocks
- Clean hydrogen
- Elimination of single-use plastics
- Carbon capture and storage
- Recycling | page 37 |
| | **Iron, steel and aluminium**: Emissions intensity of 1.05 tCO$_2$/t metal | - Recycling and secondary production
- Clean electricity
- Carbon capture and storage
- Inert anodes
- Clean fuels
- Upgraded raw materials | page 39 |
| | **Mining**: Thermal coal mining specific target of 70 per cent reduction of absolute financed emissions$^b$. Approach to be defined for other mining | - Thermal coal phase-out
- Transition metals
- Decarbonisation of on-site operations
- Clean electricity
- CCS technology
- Alternative beneficiation and extraction | page 42 |
| **Real estate** | **Commercial and residential**: No target set; assessing data availability, methodologies and materiality of our portfolio. | - Energy efficiency
- Low-carbon heating or cooling
- On-site clean energy generation
- Reduce embodied emissions
- Smart buildings/homes | page 45 |
| **Food, forests and other land use** | No target set; assessing data availability, methodologies and materiality of our portfolio. | - Reduce Waste
- Low-carbon consumption
- Sustainable supply chains (preventing deforestation, low carbon)
- Nature restoration
- Low carbon agriculture (precision agriculture; alternative proteins, pesticides and fertilisers; vertical farming) | page 48 |
$^a$ For further details of our financed emissions targets, see *Measuring progress* on page 84.
$^b$ Versus 2020 baseline.
***
# Our approach to implementation
## Our implementation plan
In order to deliver on our ambition to be net zero by 2050 and create meaningful impact in the real economy, we are setting out our implementation plan to embed net zero across key areas of our organisation. For us, this includes embedding net zero into: how we support our customers; the way that we operate as an organisation; and how we partner for systemic change.
Embedding net zero across our business is an ongoing process. In 2024, like many of our peers and customers, we are still in the infancy of the transformation that is required to execute our net zero ambition. It will necessitate continual learning, agility, prioritisation and transparency as we look to respond to the pace of change in the real economy and evolving customer demands, policies and regulation. We have started on this journey, but recognise there is still much more to do to become a net zero organisation.
### 1 Supporting our customers
Our customers are central to everything we do. To help achieve the scale and speed of change required to transition industry and decarbonise trade and global supply chains, we know we need to support our customers not just with finance, but with the services, insights and tools they need to transition. Listening to and engaging with our customers is key to understanding the context and implications of decisions we take in support of their, and our, net zero transition. We appreciate that net zero considerations vary significantly for our customers depending on their business and operating environment. Our personal and private banking customers will require a different approach again. We are focused on helping to identify the solutions most suited to meet our customers’ needs.
Supporting the transition in our global markets and in the “hard-to-abate” and high transition risk sectors, rather than simply pivoting to only support the “easy-to-decarbonise” sectors, is a challenge. Engagement and building trust with our customers and our stakeholders is key to success.
In our transition plan, we outline our approach to supporting our customers in two parts: engaging our customers, including how we are engaging with our in-scope corporate customers (see page 54) on their transition plans; and providing transition solutions, where we set out the products and services that we offer to support our customers to transition. Not all products and services mentioned are currently available in all HSBC markets.
### 2 Embedding net zero into the way we operate
Our first step towards embedding net zero into our business was to place “transition to net zero” as one of the four pillars of our corporate strategy in 2021. This put our ambition to play an important role in the transition at the heart of our organisation, recognising that supporting the transition can create value for HSBC, our customers and our investors.
With net zero as a key part of our corporate strategy, the transition becomes an important part of our oversight structures and resource allocation, with key performance indicators that begin to measure how we are executing on our corporate strategy and linked executive performance scorecards and management reporting.
In our transition plan we set out how we are embedding net zero considerations across key areas of our organisation. This includes how we have begun to integrate net zero into our key sustainability risk policies and our core risk, evaluation and decision-making tools and processes at client, transaction and portfolio levels. We have also highlighted where a tailored approach is being taken by individual business lines, for example in relation to our asset management and insurance businesses, in response to their own regulatory or legal obligations (see pages 62 and 63). Our transition plan also includes how we are integrating transition to net zero requirements into our governance and incentives, operating model, culture and capabilities, and how we measure our progress. We have an ambition to be net zero in our own operations and supply chain by 2030, mobilising our organisation to cut emissions across our energy consumption, travel and supply chains.
### 3 Partnering for systemic change
Our ability to reach our own net zero ambition is heavily reliant on the mobilisation of all stakeholders, public and private, across geographies. We seek to engage on policies, regulation and partnerships that support the transition and help to scale the new technologies, infrastructure and business models critical to net zero. We recognise that we need to be consistent in this advocacy by engaging with trade associations and working with the wider business community to help build collective calls for change.
We have a track record of advocating for progress across the financial system. We are a signatory of the Taskforce on Climate-related Financial Disclosures (TCFD) and continue to call for disclosures on climate risk alongside company emissions and company transition plans. This is important information for investors and financiers making risk-based decisions. Other areas of focus include new standards for sustainable finance product design, addressing sustainable finance taxonomies, and policies and regulation for scaling clean technologies.
Supporting systemic change requires collaboration with industry peers, customers, governments, scientists and entrepreneurs. We plan to continue to collaborate in initiatives that support large-scale action and impact. This includes as participants in relevant strategic alliances and initiatives, for example, as founding members of the Glasgow Financial Alliance on Net Zero and the Sustainable Markets Initiative, as well as partnerships aimed at scaling finance into new technologies (e.g. Breakthrough Energy Catalyst) and into emerging markets (e.g. Just Energy Transition Partnerships).
***
# Sector transitions
21 Energy supply
26 Transport
26 Automotive
29 Aviation
32 Shipping
34 Heavy industry
34 Cement
37 Chemicals
39 Iron, steel and aluminium
42 Mining
45 Real estate
48 Food, forests and other land use
***
# Energy supply
## Sector transition overview
### Pathways to net zero
Coal, oil, and gas contribute 80 per cent of global primary energy supply, and their extraction, transportion and use in power generation, transport, industry, buildings and petrochemicals accounts for three-quarters of world carbon emissions.$^{24}$ A breakdown of value chain emissions is shown below.
To achieve net zero, the transition away from unabated fossil fuels is essential. This requires replacing coal, oil and gas throughout the economy with clean electricity and low-carbon fuels, and using carbon capture and storage (CCS) technology where other options are not technically and economically feasible. While reducing fossil fuel use is vital, there will still be some reliance on oil and gas all the way to 2050.$^{25}$ This highlights the importance, therefore, of also abating the carbon emissions from this remaining fossil fuel use.
### Rapid growth in electrification and clean electricity
Electricity demand is set to multiply at least two or three times by 2050 as consumers shift to electric vehicles; building and low and medium temperature industrial heat is electrified; and demand for clean hydrogen ramps up.$^{26}$ This will be partially offset by improvements in energy efficiency. As electricity demand increases, supply will decarbonise: the IEA NZE 2023 scenario indicates that the share of renewable electricity increases from 30 per cent in 2022 to 59 per cent by 2030, and 89 per cent by 2050, with low-cost wind and solar taking the lead.$^{27}$
To support this growth and integrate variable wind and solar power, new grid infrastructure and flexibility will be needed, including technologies like batteries, interconnectors, demand response, and seasonal energy storage. Other zero-emissions electricity like hydro, biomass, nuclear, and geothermal will also play a role.$^{28,29}$ To support growth in clean electricity and meet demand, the world’s power grids are projected to double in length by 2050. It will be particularly necessary and challenging in emerging markets to simultaneously support widespread renewables build-out and ensure universal energy access.$^{30,31}$
***
# Additional Information
95 Cautionary statement
97 Endnotes
***
# Endnotes
1 IPCC (2018) *Special Report: Global Warming of 1.5°C*. Available at: https://www.ipcc.ch/sr15/
2 Net Zero Tracker. Available at: https://zerotracker.net/
3 IEA (2022) *World Energy Outlook 2022*. Available at: https://www.iea.org/reports/world-energy-outlook-2022/key-findings
4 Analysis of publicly available 1.5°C-aligned scenarios by McKinsey’s Transition Finance Model (as at June 2023). Please see page 6 for further information.
5 GFMA (2020) *Climate Finance Markets and the Real Economy*. Available at: https://www.sifma.org/wp-content/uploads/2020/12/Climate-Finance-Markets-and-the-Real-Economy.pdf
6 See endnote 4 above
7 Nature Climate Change (2019) *Contribution of the land sector to a 1.5°C world*. Available at: https://www.nature.com/articles/s41558-019-0591-9
8 Euromoney (2023) *The world’s best bank for trade finance 2023: HSBC*. Available at: https://www.euromoney.com/article/2bpjdx891e2j11bp64lj4/awards/awards-for-excellence/the-worlds-best-bank-for-trade-finance-2023-hsbc
9 See endnote 4 above
10 IEA (2023) *Net Zero Roadmap: A Global Pathway to Keep the 1.5°C Goal in Reach 2023 Update*. Available at: https://www.iea.org/reports/net-zero-roadmap-a-global-pathway-to-keep-the-15-0c-goal-in-reach
11 World Economic Forum (2021) *Net-Zero Challenge: The supply chain opportunity*. Available at: https://www.weforum.org/publications/net-zero-challenge-the-supply-chain-opportunity/
12 UNEP (2019) *Emissions Gap Report 2019*. Available at: https://wedocs.unep.org/bitstream/handle/20.500.11822/30797/EGR2019.pdf?sequence=1&isAllowed=y
13 Climate Watch (2022) *GHG Emissions, 2020 dataset*. Available at: https://www.climatewatchdata.org/ghg-emissions
14 Crippa, M., Solazzo, E., Guizzardi, D. et al. (2021) *Food systems are responsible for a third of global anthropogenic GHG emissions*. Available at: https://doi.org/10.1038/s43016-021-00225-9
15 NZFR (2021) *Net Zero Financing Roadmaps, Key Messages*; and BNEF (2022) *The $7 Trillion a Year Needed to Hit Net-Zero Goal*. Available at: https://assets.bbhub.io/company/sites/63/2021/10/NZFRs-Key-Messages.pdf; and https://about.bnef.com/blog/the-7-trillion-a-year-needed-to-hit-net-zero-goal/
16 See endnote 4 above
17 See endnote 4 above
18 See endnote 4 above
19 NZFR (2021) *Net Zero Financing Roadmaps, Key Messages*. Available at: https://assets.bbhub.io/company/sites/63/2021/10/NZFRs-Key-Messages.pdf
20 See endnote 4 above
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# HSBC Holdings plc
Incorporated in England on 1 January 1959
with limited liability under the UK Companies Act
Registered in England: number 617987
**Registered Office and Group Head Office**
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Telephone: 44 020 7991 8888
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Further details on our climate strategy can be found at
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