HSBC Holdings PLC

Under Enhanced Due Diligence for IPOs and primary debt issuance, investment teams will have to assess the transition plans of any issuer with more than 10 per cent revenue exposure to thermal coal for alignment with our Net Zero Objective. This assessment will be overseen by Asset Management's Asset Class ESG Committees and ESG Oversight Committee.

######  Oversight of the application of this policy will be conducted by HSBC Asset Management's ESG Oversight Committee, Alternatives Sustainability Oversight Committee and Sustainability Forum.

HSBC Holdings plc is responsible for the preparation and reporting of financed emissions information and all the supporting records, including selecting appropriate measurement and reporting criteria, in our annual report, the ESG Data Pack and the additional reports published on our website. The model we have developed to calculate our financed emissions baseline is subject to a governance process that includes input from model users and peer review from external consultants and senior stakeholders across our businesses and functions. Subject matter experts from GBM and CMB reviewed and challenged model design choices and assumptions through a series of workshops. Model development and outputs are governed by the Climate Aligned Finance ('CAF') Programme Steering Committee. This meeting is made up of senior representatives across global lines of business (GBM and CMB) and business functions (Corporate Sustainability, Global Finance, Global Risk and Compliance, Data Architecture Office, Legal, Investor Relations). Subject matter experts and external consultants are also invited where appropriate. The CAF Steering Committee is overseen by the Group Executive Committee and the Group ESG Steering Committee. In addition to these meetings and discussions, the end-to-end model was also subject to HSBC's three lines of defense governance processes.

We recognise that actual and potential conflicts of interest may arise in our engagement and voting. We have established policies, procedures and protocols to identify and manage such conflicts. These include: functional and operational independence from other HSBC Group companies, guidelines for our voting, as well as procedures to escalate, manage and monitor conflicts. [...] Oversight of conflicts of interest is embedded within our governance framework, which includes regular risk management meetings, a Stewardship, Fiduciary and Conflicts Forum, and CEO responsibility for compliance with HSBC Group's conflict of interest policy.

### Climate governance including lobbying

###### u Ensure senior management are accountable for the company's climate strategy
##### and there is sufficient board oversight of material climate risks.

###### u Publish a Paris-aligned climate lobbying position, consistent with an overall net
##### zero outcome.

Stakeholder engagement has been a priority for the Board in 2021. For example, the Board oversaw HSBC's continuing work in support of our ambition to align our financed emissions to net zero by 2050 or sooner. This included engaging shareholders and leading NGOs ahead of the 2021 AGM, when our special resolution on the next steps in relation to our climate ambition was overwhelmingly approved. We also reviewed and approved a new thermal coal phase-out policy, which we announced in December 2021 and is designed to allow HSBC to help facilitate the transition to net zero in both developed and developing markets. [...] Following the announcement of the Group's climate ambition in October 2020 and ahead of the 2021 AGM, the Board received a shareholder requisitioned resolution from ShareAction, together with a number of other shareholders, in relation to the Group's climate agenda. Selected Board members and senior management engaged extensively with ShareAction, certain co-filers and other shareholders, to understand their perspectives and rationale in submitting the shareholder resolution. As a result of such engagements, the Board carried out further discussions in its meetings to consider our approach in terms of sectorial priorities and associated timelines, in order to help support the delivery of our climate ambition most effectively, while recognising our responsibilities to our customers and communities across the diverse range of markets in which we operate. Ultimately, following further engagement and discussion, the Board welcomed and agreed the decision by ShareAction, on behalf of the co-filers, to withdraw the requisitioned resolution and in its place, support HSBC's own climate change resolution at the 2021 AGM. The HSBC resolution outlined the next phase of the Group's net zero strategy, with a particular emphasis on how it would support its customers on their own transition journeys. [...] The climate change resolution was passed at the 2021 AGM, with 99.7% of our shareholders supporting our resolution, providing a strong endorsement of our climate plan and our commitment to support our customers on their transitions to a low-carbon future. The resolution committed us to: setting out the next steps in our transition, including through short- and medium-term sector-based targets; publishing a policy to phase out the financing of coal power and thermal coal mining by 2030 in EU and OECD countries, and by 2040 globally; and reporting annually on our progress. We also indicated that we would provide further details by the end of 2021 on our approach to assessing financed emissions and setting targets. In December 2021 the Board approved the publication of the thermal coal phase-out policy, and further details on our approach to assessing financed emissions and setting targets. In doing so the Board took into consideration the requirements of the climate resolution and the extensive engagement with stakeholders, both before and after the 2021 AGM. In Board meeting discussions, Directors considered long-term objectives including the responsibility of helping to ensure continued and expanding access to affordable electricity in the markets we serve, many of which are presently highly reliant on thermal coal. The Board also considered the need to phase out the financing of coal-fired power and thermal coal mining in recognition of the rapid decline in coal emissions required for any viable pathway to 1.5˚C and the important role for HSBC to play in helping to finance our clients' transition to net zero. The Board noted that the policy was a key part of executing the Group's ambition to align its financed emissions to net zero by 2050 or sooner and would be reviewed annually based on evolving science and internationally recognised guidance, given the fast changing landscape. For further details on our policy and approach, see page 62 of our ARA 2021.

### 4. Description of policies to identify and prioritise principal adverse impacts on sustainability factors
As part of HSBC Group, we engage in open and transparent communication with third-party asset managers to ensure our views on ESG are aligned and reflected in each Asset Manager's investment strategy. Global Private Banking (with representation from each local Private Banking market) hosts regular oversight forums with each Asset Manager to review their approach to ESG investment strategy, and any relevant policies, frameworks, and calculation methodologies, to ensure that they are aligned with Global Private Banking's objectives and commitments to our clients.

### Stand-alone policies and statements (for example on Banned Weapons, Biodiversity, Climate Change and Thermal Coal) alongside the Responsible Investment Policy, further outline HSBC Group's approach on how we integrate associated risks and opportunities in the investment process, as well as our engagement focus and collaborative activities.

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### These policies have been approved and are kept under review by the HSBC Asset Management Ltd Sustainability Forum – which includes our global CEO, CIO, Heads of Risk, Legal and Sustainability - as follows: Banned Weapons (June 2023), Energy (November 2023) and Thermal Coal (November 2023). The investment function is

responsible for the implementation of these policies, overseen by HSBC Asset Management Asset Class ESG Committees and the ESG Investment Committee.

##### Governance and oversight of stewardship activities

Oversight of stewardship activity is embedded within our governance
framework, including:

 ESG Investment committee: chaired by our Global Chief Investment
Officer (CIO) and Global Head of Responsible Investment, this is the
highest-ranking investment decision-making body overseeing
responsible investment implementation, including stewardship
activities, ensuring best practice and alignment with our policies. The
committee typically meets on a monthly basis and is part of the
management structure of the global investment function.

 Sustainability Forum: comprising a sub-set of our global senior
leadership team, this forum is responsible for managing and
monitoring our sustainability activities, including stewardship, and
serves as a platform to discuss subjects that could result in conflicts in
fulfilling our fiduciary obligations.

 Stewardship Committee: reporting to the ESG Investment
committee, this committee oversees the successful implementation
and delivery of the Stewardship Plan, Global Voting Guidelines, and
stewardship aspects of policies (e.g., coal policy) across the
investment function. It also provides guidance to internal stakeholders
on stewardship matters and thematic priorities, sharing market and
industry best practices where relevant. This committee meets at least
quarterly.

##### Resourcing of stewardship activities

The stewardship function is part of the HSBC AM Responsible Investment
team. It leads our voting and engagement activity, and is responsible for
integrating stewardship into our investment research process.

Stewardship activities are also carried out by other individuals across the
investment function, including analysts and portfolio managers, which
helps us scale our stewardship efforts across a broad range of companies
and markets. The stewardship function provides support and training to
investment teams involved in stewardship activities.

Our stewardship activities are also supported by operational, client
services and technology teams.

Our relationship managers are primarily responsible for assessing relevant considerations under our risk management framework, including whether our clients may be in scope of applicable sustainability risk policies, with input from technical experts in our Sustainability Centre of Excellence and second line review and challenge from Risk colleagues. [...] Such instances may require additional review and approval by our sustainability risk specialists and risk committees. [...] Oversight of the development and implementation of policies is the responsibility of relevant governance committees comprised of senior members of the Group Risk and Compliance function and global businesses.

### Climate governance including lobbying

###### u Ensure senior management are accountable for the company's climate strategy
##### and there is sufficient board oversight of material climate risks.

###### u Publish a Paris-aligned climate lobbying position, consistent with an overall net
##### zero outcome.

## 4. Description of policies to identify and prioritise principal adverse impacts on sustainability factors\n As part of HSBC Group, we engage in open and transparent communication with third-party asset managers to ensure our views on ESG are aligned and reflected in each Asset Manager's investment strategy. Global Private Banking (with representation from each local Private Banking market) hosts regular oversight forums with each Asset Manager to review their approach to ESG investment strategy, and any relevant policies, frameworks, and calculation methodologies, to ensure that they are aligned with Global Private Banking's objectives and commitments to our clients.\n\n## Stand-alone policies and statements (for example on Banned Weapons, Biodiversity, Climate Change and Thermal Coal) alongside the Responsible Investment Policy, further outline HSBC Group's approach on how we integrate associated risks and opportunities in the investment process, as well as our engagement focus and collaborative activities.\n\n--NEW-PAGE--\n\n## These policies have been approved and are kept under review by the HSBC Asset Management Ltd Sustainability Forum – which includes the global CEO, CIO, Heads of Risk, Legal and Sustainability – as follows: Responsible Investment (January 2022), Banned Weapons (June 2022), Biodiversity (June 2022), Climate Change (June 2022) and Thermal Coal (September 2022). The investment function is responsible for the implementation of these policies, overseen by HSBC Asset Management Asset Class ESG Committees and the ESG Investment Committee.\n\n At portfolio level, the prioritisation of PAI depends on the sustainability objectives or Environmental (E) and/or Social (S) characteristics of the portfolio. As minimum standard, PAI are identified and mitigated through the application of exclusions – all sustainable mandates avoid exposure to certain companies or sectors that may seem harmful to the environment or society – for example investments in companies in breach of the United Nations Global Compact (UNGC) or involved in controversial weapons. In addition, for certain products, PAI indicators are selected as sustainability indicators and considered in portfolio construction. For mandates that make investments in third-party funds, an enhanced due diligence process is applied to the investment process.\n\n## SEIL's views on ESG are aligned with HSBC Asset Management and focus on three pillars: sustainability in manager research, sustainable investing solutions and investment stewardship. We continue to work with SEIL on these areas and to develop an appropriate PAI framework for the discretionary product range.\n\n SEIL's Corporate Social Responsibility Committee was established in 2018 and meets quarterly to coordinate and promote sustainability efforts across SEIL globally. Its mandate includes both corporate and investment management initiatives. This committee supports SEIL's activities that further the environmental, social, and governance (ESG) principles laid out in their ESG statement (see below).\n\n## HSBC Asset Management's policies are available on the website at: http://www.assetmanagement/hsbc/about-us/responsible-investing/policies\n\n SEIL policies are available on the website at: https://www.seic.com/our-commitment/sustainable-investing\n\n## 5. Engagement policies\n We strongly believe in the impact and effectiveness of engagement to encourage improvement in corporate practices and therefore actively engage with the companies in which we and our partners invest. Our engagement policy describes our approach to shareholder engagement where we invest for our clients as part of our discretionary management services directly in equity shares. Discretionary portfolios that invest in funds managed by third-party asset managers, HSBC Asset Management or SEIL Investments Europe Limited, will apply their engagement policies.\n\n If companies present sustainability risks, company management teams are engaged directly to raise areas of concern. Board members, executive management and responsible officers are engaged to build a constructive dialogue between investors and companies. Where applicable, voting rights are leveraged to reward positive corporate development, drive behavioural change, and hold company directors accountable when they fail to meet expectations.\n\n## The full range of internal and external data on PAI is drawn upon to inform the engagement approach. A well-established escalation procedure is used, with a range of engagement tools where issuers do not respond sufficiently, or PAI are not reduced. Even though we see disinvestment as a last resort option, we may apply selective exclusions when we deem engagement to be unsuccessful in a timeframe we consider reasonable for companies to implement desired changes.\n\n Annual stewardship plans are published, which also detail approaches to prioritisation of engagement topics and includes several indicators for PAI considered in engagement. These include greenhouse gas emissions, labour and social impacts of climate transition, biodiversity loss, potential human rights violations, gender inequality and economic inequality.\n\n## Detailed information on monitoring issuers, voting and engagement can be found in the links below:\n\n Private Bank Luxembourg S.A. engagement policy: https://www.privatebanking.hsbc.com/about-us/financial-regulations/shareholder-rights-directive-II/\n\n--NEW-PAGE--\n\n## HSBC Asset Management engagement policy: http://www.assetmanagement/hsbc/about-us/responsible-investing/policies\n\n SEIL engagement policy: https://www.seic.com/sites/default/files/2022-04/SEI-Shareholder-Rights-Directive-II-EngagementPolicy.pdf\n\n## SEIL proxy voting policy and procedures: https://www.seic.com/proxy-voting/proxy-voting-policy-and-procedures

Describe the process(es) your organization has in place to ensure that your engagement activities are consistent with your overall climate change strategy[…]In October 2020, we announced an ambitious plan to prioritise financing and investment that supports the transition to a net zero global economy, citing a landmark opportunity to build a thriving, resilient future for society and businesses. The bank committed to align its financed emissions – the carbon emissions of its portfolio of customers – to the Paris Agreement goal to achieve net zero by 2050 or sooner.
In March 2022, to help accelerate the energy transition we have committed to phase down fossil fuel financing to what is required to limit the global temperature rise to 1.5°C. This includes our commitment to phase out thermal coal financing in EU/OECD by 2030, and worldwide by 2040. We have also set short-term science-based targets of 34% reduction in absolute Oil and Gas financed emissions by 2030, and 75% reduction in financed emissions intensity for the Power & Utilities sector (on-balance sheet targets).
For capital markets activities, similar considerations will be built into our business processes and aligned with client transition plan reviews. We expect to publish financed emissions targets for capital markets activities for both the above sectors in Q4 2022, once the Partnership for Carbon Accounting Financials (PCAF) accounting standard for capital markets is published.
HSBC has contributed constructively to proposals from the European Commission. HSBC has responded directly to consultations and proposals and indirectly via trade associations. For example, HSBC is a co-chair of the AFME Sustainable Finance Steer Co which provides input directly and through its various working groups to policymakers in the form of position statements and direct engagement with European Commission officials, Members of the European Parliament and their staff, and representatives of the EU Member States designed to improve the workability of such proposals and to grow capacity for sustainable finance and investment by creating a supporting framework of policy and regulation.

Describe the process(es) your organization has in place to ensure that your external engagement activities are consistent with your climate commitments and/or climate transition plan?[…]In October 2020, we announced an ambitious plan to prioritise financing and investment that supports the transition to a net zero global economy, citing a landmark opportunity to build a thriving, resilient future for society and businesses. The bank committed to aim to align its financed emissions – the carbon emissions of its portfolio of customers – to the Paris Agreement goal to achieve net zero by 2050 or sooner.

Does your organization have a public commitment or position statement to conduct your engagement activities in line with the goals of the Paris Agreement?[…]Yes