AmazonScience/document-haystack

1ESG review2Financed emissions  3We announced our ambition to become a net 4zero bank in October 2020, including an aim 5to align our financed emissions to net zero 6by 2050 or sooner. We have published initial 7financed emissions targets for 2030, and plan to 8review them in five-year increments thereafter.9Our analysis of financed emissions comprises 10‘on-balance sheet financed emissions’ and 11‘facilitated emissions’, which we distinguish 12where necessary in our reporting. Our on-13balance sheet financed emissions include 14emissions related to on-balance sheet 15lending, such as project finance and direct 16lending. Our facilitated emissions include 17emissions related to financing we help clients 18to raise through capital markets activities. Our 19analysis covers financing from Global Banking 20and Markets, and Commercial Banking.21Financed emissions link the financing we 22provide to our customers and their activities 23in the real economy, and provide an indication 24of the associated greenhouse gas emissions. 25They form part of our scope 3 emissions, 26which include emissions associated with the 27use of a company’s products and services.28In 2021, we started measuring financed 29emissions for oil and gas, and power and 30utilities. Following the December 2023 release 31of the PCAF Global GHG Accounting Standard 32for capital markets, we now include facilitated 33emissions for these sectors, in recognition of 34our role as service provider when customers 35issue debt and equity to investors. For target 36setting we now track the combined progress 37for on-balance sheet financed and facilitated 38emissions. 39In 2022, we disclosed the on-balance sheet 40financed emissions targets for the following 41additional sectors: cement; iron, steel and 42aluminium; aviation; and automotive. We also 43set a target, and now measure, on-balance 44sheet financed emissions for the thermal coal 45mining sector. As part of our financial reporting, 46we present the progress for these sectors 47against the financed emissions baselines that 48we now measure ourselves against.49Following a reduction in our exposure to the 50shipping sector after the strategic sale of part 51of our European shipping portfolio in 2023, 52and work undertaken to assess the materiality 53of our remaining portfolio from a financed 54emissions perspective, we have concluded 55that the remaining exposure as of year-end 562023 is not material enough to warrant setting 57a stand-alone target. This aligns with NZBA 58guidelines on sector inclusion for target setting.59We have announced a number of planned 60business disposals in recent years, and we will 61continue to consider how these may impact 62future disclosures, including recalculations.63For all sectors other than oil and gas and 64thermal coal mining, we have set emissions 65intensity targets. These targets are linked to 66real world production and help us to deploy 67capital towards decarbonisation solutions.68TCFD69Our approach to financed emissions70In our approach to assessing our financed 71emissions, our key methodological decisions 72were shaped in line with industry practices 73and standards. We recognise these are 74still developing.75Coverage of our analysis76For each sector, our analysis focuses on the 77parts of the value chain where we believe the 78majority of emissions are produced to help 79reduce double counting of emissions. By 80estimating emissions and setting targets for 81customers that directly account for, or indirectly 82influence, the majority of emissions in each 83industry, we can focus our engagement and 84resources where we believe the potential for 85change is highest. For each sector, our reported 86emissions now typically include all the major 87greenhouse gases, including carbon dioxide, 88methane and nitrous oxide, among others. 89These are reported as tonnes of CO2 equivalent, 90in line with NZBA guidelines.91To calculate annual on-balance sheet financed 92emissions, we use drawn balances as at 31 93December in the year of analysis related to 94wholesale credit and lending, which include 95business loans and project finance as the 96value of finance provided to customers. We 97excluded products that were short term by 98design, and typically less than 12 months 99in duration, consistent with guidance from 100the PCAF, to reduce volatility. For facilitated 101emissions we considered all capital market 102transactions in scope for the year of analysis. 103These included debt and equity capital 104markets, and syndicated loans. 105 For further details of our financed emissions 106methodology, exclusions, and limitations, see our 107Financed Emissions and Thermal Coal Exposures 108Methodology at www.hsbc.com/who-we-are/109esg-and-responsible-business/esg-reporting-110Sector Scop e of emissions Valu e chain in scope111Coverage of greenhouse 112gases (’GHGs’)113Oi l an d gas 1 , 2 an d 3114Powe r and utilities 1 an d 2115Automotive 1 , 2 an d 31161 , 2 an d 3117Aviation 1 fo r airlines,  1183 for aircraft les sors119Iro n, steel and 120aluminium1211 an d 2122Cement 1 an d 2123Thermal coal mining124Upstream 125(e.g. extraction)126Upstream  127(e.g. generation)128Midstream 129(e.g. motor vehicle 130manufacture)131 132Midstream133(e.g. ore to steel)134Midstream 135(e.g. aircraft manufacturing)136Midstream (e.g clinker  137and cement manufacturing)138 139Midstream  140(e.g. transport)  141 142Upstream143(e.g. suppliers)144 145 Upstream (e.g. raw  146materials, extraction)  147 Upstream148(e.g. parts manufacturers)  149 Upstream (e.g. raw  150materials, extraction)  151 152 153Downstream  154(e.g. fuel use)  155Midstream  156 157 158Downstream159(e.g. retail)160 161 Downstream162(e.g. construction)  163 Downstream164(e.g. airlines and air lessors)  165 Downstream166(e.g. construction)  167Integrated/ 168diversified169 Downstream170(e.g. retail)  171All GHGs172All GHGs173All GHGs174All GHGs175All GHGs176All GHGs177All GHGs178Key: Included i n analysis179(e.g. transmission 180and distribution)181Upstream  182(e.g. extraction)183 184 185 Downstream186(e.g. retail)187Midstream188(e.g. processing)  189The chart below shows the scope of our financed emissions analysis of the seven sectors, including upstream, midstream and downstream 190activities within each sector. The allocation of companies to different parts of the value chain is highly dependent on expert judgement and data 191available on company revenue streams. As data quality improves, this will be further refined.192centre.193HSBC Holdings plc Annual Report and Accounts 2023 53194Environmental