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1ESG review2Asset Management policy3HSBC Asset Management published its own 4policy on thermal coal in September 2022, 5and its own energy policy in November 62023. As an asset manager, it is subject to 7separate regulatory and legal obligations to 8deliver customers’ investment interests and 9deliver fair outcomes.10Under its thermal coal policy, HSBC Asset 11Management will not hold listed securities 12of issuers with more than de minimis 13revenue exposure to thermal coal in its 14actively managed funds beyond 2030 for EU 15and OECD markets, and globally by 2040. 16The policy also includes enhanced due 17diligence on the transition plans of investee 18companies with thermal coal exposure. 19Companies held in investment portfolios 20that do not develop credible plans to 21transition away from thermal coal could face 22voting sanctions and ultimately a divestment 23of holdings.24Under its energy policy, HSBC Asset 25Management will engage with – and 26assess the transition plans of – oil and gas, 27and power and utilities companies held in 28its portfolios. For its active fundamental 29sustainable named funds, it will exclude 30listed issuers whose overall operations are 31substantially in unconventional oil and gas, 32subject to data availability, and with the level 33and scope of exclusions to be set out in fund 34prospectuses. In its alternatives business, it 35will not undertake new direct investments 36in projects associated with the energy-37related activities identified as excluded 38from new finance or advisory services 39under the Group energy policy. HSBC Asset 40Management’s policy work will continue to 41support the Group’s sustainability objectives 42and the commitment made under the Net 43Zero Asset Managers initiative to support 44investing aligned with net zero by 2050. 45We continue on the journey of policy 46implementation, including engaging with 47the companies in which we invest, and 48improving the data we rely on to monitor  49the policies.50 For further details of the energy policy, see 51www.assetmanagement.hsbc.lu/-/media/files/52attachments/common/energy-policy-en.pdf.53 For further details of the thermal coal policy, 54see www.assetmanagement.hsbc.co.uk/-/55media/files/attachments/common/coal-policy-56en.pdf.57Sustainability risk policies continued58Our thermal coal phase-out policy59As set out in the thermal coal phase-out 60policy, we are committed to phasing out the 61financing of thermal coal-fired power and 62thermal coal mining in EU and OECD markets 63by 2030, and globally by 2040. 64Our policy aims to support thermal coal 65phase-out aligned to science-based 66timeframes, recognising the different pace 67between advanced and emerging economies. 68In turn our policy supports progress towards 69our financed emissions targets for the power 70and utilities and thermal coal mining sectors.71The policy was first published in December 722021 and is reviewed annually, with the most 73recent update in January 2024, to help ensure 74that it remains aligned with our commitments 75and takes into consideration relevant changes 76in external factors.77 For our thermal coal phase-out policy, see www.78hsbc.com/-/files/hsbc/our-approach/risk-and-79responsibility/pdfs/240125-hsbc-thermal-coal-80phase-out-policy.pdf.81 For further details of our thermal coal phase-out 82policy January 2024 update, see page 71 of our 83Net Zero Transition Plan 2024, which is available 84at www.hsbc.com/who-we-are/our-climate-85strategy/our-net-zero-transition-plan.86Thermal coal financing exposures87We intend to reduce thermal coal financing 88drawn balance exposure from a 2020 baseline 89by at least 25% by 2025 and aim to reduce it 90by 50% by 2030.91In our Annual Report and Accounts 2022  we 92acknowledged that our processes, systems, 93controls and governance were not yet designed 94to fully identify and disclose thermal coal 95exposures and that we planned to reassess the 96reliability of our data and review our basis of 97preparation to help ensure that we are reporting 98all relevant thermal coal exposures aligned to 99our thermal coal phase-out policy.100We have now revised the basis of preparation 101for our thermal coal exposures. Aligned with 102our thermal coal phase-out policy, we applied 103a risk-based approach to identify clients and 104report on relevant exposures. This includes 105the use of globally recognised third-party 106data sources to screen clients and applies 107materiality considerations to product type, 108customer type and exposure type, which 109informs inclusion and exclusion requirements. 110Specifically, for product types, short-term 111lending exposures are excluded from our 112thermal coal financing exposures reporting in 113line with our financed emissions methodology. 114For customer types, exclusions are applied for 115certain customer types such as sovereigns 116and individuals. For exposure types, a 117threshold of $15m for drawn balances is 118applied for thermal coal financing exposures 119reporting. For the avoidance of doubt, the 120$15m threshold applies only to exposure 121reporting analysis and does not apply to  122the application of the thermal coal  123phase-out policy. 124 For further details of our Financed Emissions and 125Thermal Coal Exposures Methodology, see 126www.hsbc.com/who-we-are/esg-and-127responsible-business/esg-reporting-centre.128Considering materiality criteria helps us to 129focus our efforts on areas where we believe 130we can help drive meaningful change, while 131taking into account experience from policy 132implementation over time. 133Applying our revised basis of preparation, 134our thermal coal financing drawn balance 135exposure was approximately $1bn † as at  13631 December 2020. We continue to work on 137our 2021 and 2022 numbers based on our 138revised basis of preparation and expect to 139report on these in future disclosures.140 For further details of our approach to financed 141emissions, see ‘Our Approach to financed 142emissions’ on page 53.143†  Dat144a is subject to independent limited assurance 145by PwC in accordance with ISAE 3000/ISAE 3410. 146For further details, see our Financed Emissions 147and Thermal Coal Exposures Methodology and 148PwC’s limited assurance report, which are 149available at www.hsbc.com/who-we-are/150esg-and-responsible-business/esg-reporting-centre. 151HSBC Holdings plc Annual Report and Accounts 2023 67152Environmental 153The secret flower is a "daisy".