Senior figures at AkademikerPension, NEST and Merseyside Pension Fund have asked regulators to investigate HSBC and PwC over their account of climate risks.
In a letter to the UK’s Financial Reporting Council (FRC), coordinated by Sarasin & Partners, the investors say they “are concerned that HSBC’s financial statements may not properly capture material climate risks in line with the UK’s Companies Act requirements that accounts provide a ‘true and fair view’”.
They added that they have been raising these issues with the bank since 2023, “but have seen little evidence of progress”.
The letter highlighted HSBC’s conclusion in its last three financial statements that it doesn’t expect climate risks to affect its financial position in the short to medium term, claiming such findings “may be excessively optimistic”.
It flagged further concerns about the fact HSBC’s climate scenarios identify 2.6°C as a ‘moderate’ risk – describing this characterisation as “at odds with scientific consensus” – as well as its apparent reliance on insurance to mitigate risks, and the downward revision of some of its anticipated expected climate-related credit losses, which the letter claims isn’t sufficiently justified.
The investors note that the bank has removed disclosures relating to the risk climate change posed to its Hong Kong mortgage book after being challenged on its credibility last year.
“However, there is no suggestion they have been revised, and we note that HSBC continues to conclude that retail mortgages and commercial real estate will face ‘minimal losses’ even under a severe ‘downside physical risk’ scenario of 4°C warming,” they told the FRC.
In addition to asking HSBC to bolster its climate risks analysis and disclosure in 2025, the investors say they “further underlined our expectation that PWC set out in its audit report greater detail on how it has considered climate risks in its review of HSBC’s accounting; and how it gained comfort that critical forward-looking assumptions (notably expected credit losses) were sufficiently prudent to ensure the final accounts provide a true and fair view of HSBC’s financial position”.
While it has seen additional disclosures since, it said the results may still be “overly optimistic”.
“In light of the ongoing lack of disclosures by HSBC and PWC on matters we perceive to be material to investors’ understanding of the bank’s capital resilience, we are writing to ask the FRC to review HSBC’s accounts and audit to determine whether they meet the required standard,” stated the letter.
It also called for a broader review of the industry, to see whether other firms were accounting for material climate risks in line with the requirements of UK Company Law.
The FRC told IPE that it had received the letter, but was unable to comment on individual cases.
A spokesperson for HSBC said the bank worked with regulators and standard setters to ensure its disclosures “meet a high standard, while remaining committed to providing balanced and reliable information to our shareholders and other stakeholders”.
“Our climate disclosures are prepared with reference to the Task Force on Climate-related Financial Disclosures’ recommendations and UK corporate reporting requirements,” he added.
“Climate-related risks are assessed through our enterprise risk management framework, using defined time horizons and materiality thresholds.”
PwC declined to comment.
