HSBC Holdings plc Environmental, Social and Governance (ESG) Supplement Supporting sustainable growth November 2017 Cover image: Situ Patenggang, West Java, Indonesia (image is a submission in an HSBC Group-wide employee competition held in 2016). Photography: Nurwata Yuda Pradana, HSBC Indonesia, Contents

1 About this Document 4

2 Introduction by 5

3 HSBC at a Glance 6

4 Supporting Sustainable Growth 8

5 Financial Crime Risk Management 15

6 Our Approach to Tax 17

7 Update on Corporate Governance 18

8 Further Information 19

Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc 3 About this Document

The purpose of this document is to provide information to stakeholders about HSBC’s approach to key environmental, social and governance (‘ESG’) issues. It is designed to serve as an extension of, and be read in conjunction with, our Environmental, Social and Governance (ESG) Update of April 2017, which was the first such report we issued. This additional document provides further or updated material, reflecting our efforts to continue to improve our ESG reporting, as well as outlining our updated sustainability strategy, described on pages 8 through 14. It also complements our Annual Report and Accounts 2016, which contains details of our organisational structure, global footprint, governance, strategy, financial performance and risk management. Where appropriate, we have provided links to further information in our Annual Report and Accounts 2016, and on our website, www..com. In our ESG reporting, we focus on the issues that we consider are material to our business. These issues are identified through an ongoing programme of investor, analyst and NGO engagement.

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’. When used in the terms ‘shareholders’ equity’ and ‘total shareholders’ equity’, ‘shareholders’ means holders of HSBC Holdings ordinary shares and those preference shares and capital securities issued by HSBC Holdings classified as equity. The abbreviations ‘$m’, ‘$bn’ and ‘$tn’ represent millions, billions (thousands of millions) and trillions of US dollars, respectively.

4 Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc Introduction

This ESG supplement is part of HSBC’s commitment to being open and transparent about how we are progressing against environmental, social and governance criteria. Photo credit: Charles Best credit: Charles Photo

[STG Approval pending, in process] As well as being the right thing to do, we firmly strategy makes a series of new commitments, believe that sharing this information will help us including a target to provide $100bn of sustainable build stronger relationships with our customers, finance. Taken together, these commitments employees and the communities we serve. It is reflect the scale of the challenge of delivering key to our ability to achieve sustainable success. the Paris Agreement and UN Sustainable Development Goals. They also demonstrate the The additional information provided in this heights of our ambition to be a leading global supplement builds on our first ESG update, partner to the public and private sectors in the published in April 2017. transition to a low carbon economy. We are also publishing our strategy to support The views of our various stakeholders continue sustainable growth. Responding to the forces of to be invaluable to us as we adapt our reporting climate change, technological advancement and processes. We will continue to listen and take globalisation presents new risks and significant account of them ahead of our next ESG update, opportunities for countries and businesses around which will be published in the first half of 2018. the world. I hope you find this supplement useful and For more than a decade, HSBC has been at the informative. forefront of the sustainable finance market. Our

Stuart Gulliver Group Chief Executive November 2017

Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc 5 HSBC at a Glance

Our purpose is to be where the growth is, enabling businesses to thrive and economies to prosper, and ultimately helping people fulfil their hopes and realise their ambitions.

Connecting customers to opportunities Today, we serve around 38 million customers worldwide, through our international network of around 3,900 offices in 67 countries and territories. Our aim is to be acknowledged as the world’s leading and most respected international bank.

The HSBC Values At HSBC, how we do business is as important as what we do. We seek to build trust-based and lasting relationships with our many stakeholders to generate value in society and deliver long-term shareholder returns. Our values define who we are as an organisation and what makes us distinctive. We believe in acting with courageous integrity. We are:

Open Connected Dependable

Open to different Connected to customers, Dependable ideas and cultures communities, regulators and each other

• Communicating openly, • Building connections, being • Standing firm for what is right, honestly and transparently, aware of external issues, and delivering on commitments, and welcoming challenge, and collaborating across boundaries. being resilient and trustworthy. learning from mistakes. • Caring about individuals • Taking personal accountability, • Listening, treating people fairly, and their progress, showing being decisive, using judgment being inclusive, and valuing respect, being supportive and and common sense, and different perspectives. responsive. empowering others.

6 Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc HSBC at a Glance

Our business model Our business model comprises of four global businesses and our Corporate Centre, as follows:

Retail Banking and Wealth Commercial Banking Global Banking and Global Private Banking Management (‘RBWM’) (‘CMB’) Markets (‘GB&M’) (‘GPB’) We help close to 36 million We support approximately We serve approximately We help high net worth people worldwide to manage 1.7 million business 4,100 clients in more than 50 individuals and their families their finances, buy their customers in 54 countries countries and territories. We to grow, manage and homes, and save and invest and territories with banking support major government, preserve their wealth. for the future. Our Insurance products and services to help corporate and institutional Corporate Centre and Asset Management them operate and grow. Our clients worldwide. Our businesses support all our customers range from small product specialists continue Corporate Centre global businesses in meeting enterprises focused primarily to deliver a comprehensive comprises Central Treasury their customers’ needs. on their domestic markets, range of transaction (including Balance Sheet through to corporates banking, financing, advisory, Management), our legacy operating globally. capital markets and risk businesses, interests in our management services. associates and joint ventures, central stewardship costs, and the UK bank levy.

Our strategy and performance We have a two-part long-term strategy: Headline results for the first half of 2017 (‘1H17’) are set out below, and reflect a – Develop our international network strong performance across our major businesses. For details of 1H17 performance and third quarter of 2017, please visit our investor website at To facilitate international trade and www.hsbc.com/investor-relations/group-results-and-reporting. capital flows and serve our clients, with potential to help them grow For the half-year to 30 June 2017: from small enterprises into large multinationals. Reported profit before tax Adjusted profit before tax – Invest in wealth and retail businesses with local scale To make the most of global social $10.2bn $12.0bn mobility, wealth creation and long-term demographic changes in our priority At 30 June 2017 markets. Risk-weighted assets Total assets $ 876.1bn $2,492bn

Find out more For significant items look at 1H17 Presentation to Analysts and Investors at www.hsbc.com/investor-relations/ group-results-and-reporting

Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc 7 Supporting Sustainable Growth

Each and every one of us has a stake in developing a sustainable economic system. It is the combined responsibility of all players in society to respond to climate change, rapid technological change and continuing globalisation to secure a prosperous future.

Since its foundation in 1865, HSBC has and provide a reporting criteria to and continuous training and adapted to and helped serve the needs position HSBC as the world’s leading engagement around sustainability of a changing world. It has financed international bank, and leading global trends (see Spotlight 2). economic growth, fostered international bank for sustainable finance. Sustainable finance trade and overcome events such HSBC is already working with our as economic crises. We recognise The Paris Agreement of 2015 was a customers and clients to help deliver that governments, corporations, the milestone moment in the fight against the extra $2.4tn of investment that financial system and civil society are climate change. The agreement aims will be required annually to achieve all stakeholders of climate change and to limit the risk of an increase in global the SDGs1. We recently supported the sustainability challenges. average temperature to 2°C above publication of The Earth Security Report pre-industrial times. With almost Now more than ever, there is a need to 2017: Sustainable Development Goals 200 national climate commitments develop the skills, business innovation for Business Diplomacy and Growth in place, governments have set out and low-carbon solutions needed to to provide a blueprint for businesses a roadmap for low-carbon transition. secure long-term prosperity for all. to navigate risk and opportunities. Meanwhile, global temperatures For HSBC, these are the key elements We will continue to consult with our continue to rise, with the effects felt of sustainable growth which we can stakeholders and will report on HSBC’s on every continent, and 16 of the 17 influence. approach to contributing towards the warmest years on record occurring SDGs in 2018, building on our initiatives Our network covers the world’s largest since 2001. Private sector finance is and commitments that enable a and fastest growing trade corridors critical to tackle climate change and sustainable future. and economic zones. As such, we other sustainability challenges. At are uniquely positioned to provide Our new sustainability approach HSBC, we aim to address the funding the connections needed to foster focuses on three main areas: gap and meet client demand via sustainable growth across borders and sustainable finance; sustainable financing and investment activities to geographies. networks and entrepreneurship; and support these sustainability priorities. future skills, the principles of which are We have comitted to provide $100bn We have a proud record of supporting outlined in the following pages. These of sustainable financing and investment the communities and environments are enabled by our ongoing standards, by 2025 (see page 10). in which we operate, and our global commitments and practices embedded sustainability strategy builds on this We are establishing our Centre of in our sustainability policies (see legacy (see Figure 1 and Figure 2). Sustainable Finance (‘Centre’) to shape Progress to date section), our and share thinking and innovation both HSBC and the Sustainable initiatives towards sustainable and within HSBC and across the financial Development Goals ethical operations (see Spotlight 1), sector. This will help unlock the capital The Sustainable Development FIGURE 1 Goals (‘SDGs’), were agreed by the HISTORICAL CHARITABLE DONATIONS AND EMPLOYEE VOLUNTEER HOURS United Nations in partnership with governments, business and civil society, therefore creating the world’s HISTORICAL CHARITABLE DONATIONS NUMBER OF VOLUNTEER HOURS agenda for sustainable development. $m 000’s 40 The 17 goals and 169 targets to be 2016 128 201611 49 achieved by 2030 are a call to action 46 to protect the planet, end poverty, and 2015 136 201511 0102030405060 ensure peace and prosperity. 44 136 51 HSBC has a responsibility to contribute 2014 104 201411 60 to this globally agreed framework for action. By aligning our values, conduct Working hours Own time 104 and business activity, the SDGs set 1 Investment Needs to Achieve the Sustainable Development Goals, SDSN Working Paper the context for our long-term ambition (unsdsn.org/wp-content/uploads/2015/09/151112-SDG-Financing-Needs.pdf)

8 Environmental, Social and Governance (ESG) SupplementSENIOR EMPLOYEES HSBC Holdings plc ALL EMPLOYEES

01020304050607080 75% 2016 25% 48% 2016 52% 6,551 2,230 116,077 125,230

6,937 2,235 127,586 139,357 76% 2015 24% 48% 2015 52%

60% 52%

C 67 C 67 C 59 C 2 C 58 C 63 C 0 DESCRIPTOR/LABEL DESCRIPTOR/LABEL M 41 M 12 M 8 M 31 M 38 M 66 M 70 Y 10 Y 38 Y 84 Y 75 Y 28 Y 7 Y 67 K 15 K 19 K 34 K 5 K 27 K 13 K 2 #547da7 #269792 #588942 #edb343 #677b88 #716196 #e54d58 Aperi ut id maionsequunt que sus Aperi ut id maionsequunt que sus moluptate coribust re praessi moluptate coribust re praessi mporum verspiet elibus, volore et mporum verspiet elibus, volore et omnimus arum rem verum quas omnimus arum rem verum quas am, ut volorerum am, ut volorerum Supporting Sustainable Growth

FIGURE 2 HSBC Sustainable Finance Highlights

2017 2016 2015 2014 2013

– Published standalone – HSBC joined the Task Force on Climate-related Financial – Pledged $1bn for – Introduced Equator – Adopted new ESG update Disclosure (TCFD) green, social or Principles 3 green bond – Ranked #1 for climate – Launched the first sovereign green bond for Poland sustainable bonds – Signed three issuance principles change and SRI and – Founding writer of Social Bond Guidance, which – Issued first green bond power purchase – Won Rio BRT Sustainability Research became Social Bond Principles via HSBC France agreements with bid and worked by institutional renewable energy with Embarq, the – HSBC Bank (UK) Pension Scheme announced the – Trained 1000th investors in Extel generators in the World Resources transfer of GBP1.85bn into a new fund that excludes sustainability leader Survey UK and India Institute companies which fail to meet minimum environmental – Additional $150m programme - Joined Cambridge standards, including relating to climate change charitable donation to – Commissioned Institute for report with Climate for sustainable – Improved disclosure of climate strategy and carbon mark HSBC’s 150th urban transport Sustainability emissions, e.g. received ‘A’ rating by CDP anniversary Bond Initiative Leadership Banking (State of the and planning, Environment Initiative – Joined Catalytic Finance Initiative, directing – HSBC Global Asset Market) to research the $8bn to sustainability projects Management signed environmental, – Appointed Global Head – Issued revised – Received Green Climate Fund (accountable to UNFCCC) up to Montreal Pledge social and of Sustainable Finance Forestry Policy, accreditation as an implementing entity – Signatory to World economic impacts and created the HSBC Agricultural of BRT systems – HSBC Water Programme extended until Dec 2019 with Economic Forum’s Centre of Sustainable Commodities on cities Finance total commitment of $150m over eight years CEO Climate Leaders Policy, and a World (see Spotlight 3) Group’s open letter – Established sustainable Heritage Sites and finance forums in key – HSBC Climate Change Centre of Excellence, voted by – Group Chief Ramsar Wetlands markets Extel as Number 1 provider of Climate Change research, Executive, Stuart Policy for the fourth year in a row Gulliver, attended and – Further update to gave keynote speech standards on palm oil – Mining and Metals Policy updated – HSBC no longer finances new thermal coal mines or new customers at COP21 – Joined RE100 dependent on thermal coal mining – Issued Statement on Climate Change

2012 2011 2010 2009 2008

– Led one of the largest project financings in Latin – Established Sustainable Operations – Established – Supported – Set four-year America in the renewables sector 2020 Strategy Climate Business first targets for – Participated in the largest offshore wind project – Energy Sector Policy issued, effectively Council project reducing financing in the world, a 75-turbine offshore wind ceasing the finance of new coal-fired – Launched Group- finance energy, water, project in England power plants in developed countries, wide paper offshore waste and wind farm carbon dioxide – Structured finance transactions for 267 low-emission including specific criteria for oil sands sourcing policy buses in Santiago, Chile, and 300 in Manaus, Brazil and nuclear energy – Led Equator – HSBC represented – Signed up to the UN’s Principles for Sustainable – Completed sixth major financing for Principles’ eco-bus system Governance Rules for the first Insurance time at COP – Launched new policy requiring all equity and credit – HSBC and Earthwatch won – Led largest at Poznan analysts to incorporate ESG into their fundamental International Green Award fundraising in research – Built Social Finance portfolio clean tech sector with $125m – Launched HSBC Water Programme ($100m to deliver – Committed five more years of funding investment water provision, protection, information and education) to Future First

2007 2006 2005 2004 2003 2002 2001 2000

– Launched – Chaired Equator – Issued – Launched – Formed – Issued – Launched – Joined ground-breaking Principles and adopted Chemicals Environmental Corporate Sustainability $50m UN Global $100m HSBC version two of Equator Policy and Action Plan Responsibility Risk partnership Compact Climate Principles Freshwater and issued Committee of Standards ‘Investing in – Launched Partnership – Issued Energy Sector Policy Environmental HSBC Nature’ with Defence – Established Policy – Set three-year Risk Strategy Holdings plc three leading Equipment Climate Change environmental – Issued Board conservation Policy – HSBC Global Asset charities Centre of Management signed targets Forestry – Adopted Excellence up to the United – Published first Sector Policy Equator – Issued Mining Nations Principles for Sustainability – Completed Principles and Metals Responsible Investment Report financing of Policy – Launched Future First (independently two Scottish – Established and Teach for All for assured) Wind Farms & Group disadvantaged children – Arranged first UK wind Sustainability financing for the sector tax – Won Financial Times lease Department ‘Sustainable Bank of the world’s largest Year’ Award eco-bus system

Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc 9 Supporting Sustainable Growth

HSBC’s Sustainable Finance Commitments:

1 Provide $100bn of sustainable financing and investment by 2025:

– Provide $100bn of financing and investments to develop clean – Support our 1.7 million corporate and institutional clients in energy, lower-carbon technologies, and projects that contribute recognising and managing risks associated with the transition to to the delivery of the Paris Agreement and the UN Sustainable a low carbon economy. 2 Development Goals . – Enhance and promote sustainable investment products for our – Lead the development of transparent and liquid debt and equity 36 million retail banking and private banking customers as well as markets for clients advancing renewable energy and low-carbon institutional clients. Engage with investee companies to ensure business activities. that they are minimising and disclosing the risks and maximising the opportunities presented by the transition to a low carbon economy.

2 Source 100% of our electricity from renewable sources by 2030, with an interim target of 90% by 2025

– Source 100% renewable electricity via direct investment or – It is our policy to not make use of unbundled Renewable Energy purchases via Power Purchase Agreements (PPAs) that directly Certificates (‘RECs’) or other instruments that do not represent a help the financing of new renewable electricity assets. Our direct investment or purchase of renewable electricity. priority will be to build on the current 24% of our global electricity – Improve the efficiency of our operations to reduce electricity consumption provided by HSBC’s PPAs, and source 100% consumption per FTE by 20% by 2020. renewable electricity in all countries where PPA structures exist. – Actively collaborate with RE1003, governments and regulators to open up renewable energy markets where PPAs or similar are not currently available, and support the decentralization of power generation across our operational centres, thereby enabling HSBC and the corporate sector to develop PPAs globally.

3 Reduce our exposure to thermal coal and actively manage the transition path for other high carbon sectors

– Discontinue financing of new thermal coal mines or new – Actively engage with clients in high carbon sectors to support customers dependent on thermal coal mining. and influence their transition strategies, review their approach to – Discontinue financing of new coal-fired power plants in reduce greenhouse gas emissions, and assess their exposure to developed countries and continuously reinforce lending criteria potential stranded assets. in developing countries, taking into account the state of climate – Regularly review our policies in light of technological change and transition and access to alternative sources of energy in individual the commercial viability of low carbon technologies. countries.

4 Adopt the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) to improve transparency

– Report according to the governance, strategy and risk – Engage with academia, industry associations and civil society management recommendations of the task force in the 2017 networks to support robust climate scenario analysis to annual report, public in February 2018. Our disclosure will address price transition and physical risk. Promote uptake of these climate-related risks and opportunities across our businesses, recommendations across our global network. including descriptions of impacted ‘transition risk’ industry sectors and related customer engagement. We will publish quantitative data on the impacted industry sectors in our 2018 annual report using a materiality-based approach. Further detailed climate metrics and scenario analysis will be provided over the coming years in accordance with the recommendations of the task force.

5 Lead and shape the debate around sustainable finance and investment

– Establish a Centre of Sustainable Finance to provide thought – Drive the sustainable finance agenda by promoting the leadership about climate change and the role of the financial development of sector activities (such as industry-wide services sector. definitions, standards, tools and metrics) to enhance market analysis of sustainability issues and impacts.

2 Reporting against this commitment will cover 2017 activity. 3 RE100 is a collaborative, global initiative uniting more than 100 influential businesses committed to 100% renewable electricity, working to massively increase demand for – and delivery of - renewable energy.

10 Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc Supporting Sustainable Growth

flows needed to address the world’s consumption 24% (in smaller print like the paper note) major sustainability challenges. The Spotlight 1: Sustainable and Ethical Operations Centre will have three main priorities: • Develop proprietary content from HSBC continues to improve its both in-house and external partners environmental performance. HSBC’s Renewable electricity as a resource to inform sector activity. IT, Real Estate, Procurement, consumption • Act as a resource centre for our Marketing, and Operations Functions increased to have improved HSBC’s environmental % global businesses to support client 2424 performance across all goals. from 2011 baseline engagement. Year on year (Q3 to Q3) performance As part of our commitment to • Drive the sustainable finance agenda highlights: decarbonise our own electricity through HSBC’s influence across consumption and support the Product industries and wider networks. global renewable power purchase Energy fees and agreement (PPA) market, we have consumption charges Through our Climate Business Council reduced by (‘CBC’), senior executives represent committed to sourcing 100% of our 1313% electricity from renewables. We will each business segment and provide a continue to focus on mature PPA Paper co-ordinated and strategic approach to markets and actively collaborate increasing our support for customers to 3 consumption with RE100 , governments, reduced by mitigate or adapt to climate change. We and regulators to open up new 7% have established dedicated sustainable renewable energy markets. with 95% procured from certified sources finance forums in key markets. These Our operational sustainability include a regional forum in Asia and efforts resulted in us scoring an Carbon country forums in Canada, China, A- (leadership score) with CDP emissions France, Hong Kong, India, Singapore, down by (previously known as the Carbon 9% the UK and the US. We will encourage Disclosure Project), a not-for-profit our clients to reduce carbon emission organisation that rates companies by improving energy efficiency, using and governments on how they Water more renewables and enhancing are tackling the climate change reduced by resilience of their operations and supply challenge. 9% chains. Dedicated teams have been set up to deliver solutions to finance Impressive Bank in Asia Pacific Green/ research to survey corporate issuers initiatives such as the roll out of electric SRI Capital Markets, #2 for EMEA, and institutional investors globally on vehicles, smart metering, and energy #3 for Americas. We were the only their attitudes to sustainable finance to efficiency in buildings, etc. bank to be ranked in the top three for provide the financial interconnectivity As of 11 October 2017, HSBC was all global markets by Global Capital to solve global climate change and ranked second in the global green, (awarded in September, 2017). HSBC sustainability challenges. We continued social, sustainability bond league was also awarded Best Underwriter in our sponsorship of the Climate Bonds tables in 2017 YTD, demonstrating our the Environmental Finance Green Bond Initiative’s annual State of the Market consistent performance in executing Awards 2017 (awarded in April, 2017). Report. We joined the newly formed and underwriting sustainable finance UK Government’s Green Finance We continue to develop the ecosystem transactions. Additionally, HSBC has Taskforce to help accelerate the growth for sustainable finance. Our CEO, acted as joint lead manager on 30 of sustainable finance. Stuart Gulliver, has played a leading (28%) more inaugural green/social/ role on The Global Commission on To grow green finance, we issued our sustainability bond deals than any other the Economy and Climate, and The own green bond in 2015. We are now bank this year, expanding into new Energy Transitions Commission, approaching the second anniversary of geographies such as Italy, Singapore, helping establish a roadmap for HSBC’s inaugural 500m green bond, South Korea, UK and sectors such € public and private actors transitioning and as such, will soon be releasing our as water, insurance, sub-sovereign to a low carbon future. Our Global second green bond report. This report issuers (KDB, Anglian Water). During Research team continues to provide will be available on our green bond the last 12 months, we worked on the industry leading climate change and webpage (www.hsbc.com/investor- following type of bonds: first sovereign ESG analysis to our GB&M clients. relations/fixed-income-investors/ green (Poland), the first green hybrid As a key member of the Green Bond green-bonds) and again give details (TenneT), the first sustainable Tier 2 Principles Executive Committee, on the allocation and impact of the (TSKB), the first green from an Italian under the New Markets Taskforce, investments made from the green bank (Intesa), the first UK corporate we worked jointly with another bank bond proceeds. GBP green utility (Anglian Water) and to translate the Green Bond Principles the first green from the insurance Our Global Asset Management into 19 different languages, facilitating sector (QBE). business has increased its range the global use of the standards, which of socially responsible investment In recognition of this work, HSBC was are publicly available. In September funds as the momentum of climate- announced as Global Capital’s #1 Most 2017, we commissioned industry

Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc 11 Supporting Sustainable Growth

related investments is continuing to build, especially in Europe and North Spotlight 2: Training and Education America, with institutional investors planning to increase their low carbon In order to support our clients’ response to climate change and sustainability investments in the years ahead. In risks and opportunities, we continue to develop the knowledge of our employees early October 2017, HSBC Global Asset via training and engagement. As we continue to embed sustainability in our Management launched two lower organisation, we are rolling out several programmes: carbon funds that meet the needs of clients who seek to address climate • In 2017, approximately 9,000 employees within our businesses completed change investment risk in their core an e-learning module on sustainability risk. global equity and credit allocation: • Since its launch in 2009, our Sustainability Leadership Programme, an intense, hands-on training, focused on the impact of climate change and • The HSBC GIF Global Lower opportunities to drive sustainable change in business, has allowed us to Carbon Equity Fund seeks a lower engage over 1,500 senior managers, clients and suppliers. portfolio carbon footprint than its reference benchmark by reducing • We will run specific climate-change training to several hundreds of relationship total exposure to securities with the managers. highest greenhouse gas emissions. • The HSBC GIF Global Lower Carbon 80% of global trade passing through An example of this is the HSBC Bond Fund looks for a lower portfolio supply chains, they are one of the most Living Business Programme (LBP’), carbon footprint than its reference important levers for businesses to a partnership between CMB and benchmark by better understanding create positive impact in the world4. the Sustainability function in Hong the impact of individual issuers and Kong. This programme helps SMEs Companies face social and sectors on total greenhouse gas become more competitive and environmental challenges within their emissions. productive by incorporating socially and supply chains, an increased demand environmentally sustainable practices HSBC Bank (UK) Pension Scheme for sustainability criteria by consumers into their business operations. The announced the transfer of GBP1.85bn to aid their purchasing decisions, and programme provides a learning platform into a new fund that excludes technology aiding transparency and for SMEs to understand the best companies which fail to meet minimum traceability in their supply chains. We practices in corporate sustainability environmental standards, including aim to support clients by collaborating and offers recognition to SMEs those relating to climate change. to develop sustainable solutions. with outstanding performance. In For example, we have taken steps Every member of the Group 2016, LBP received approximately to engage with NGOs and corporate Management Board has sustainability 1,660 applications from SMEs. The partners to promote sustainability in metrics built into their annual and annual Living Business Awards the palm oil industry, as detailed under long-term performance scorecard, showcase SMEs that improve their Progress to date (see page 13). We which is used to determine any variable competitiveness and productivity have committed funding for the Apparel pay award at the discretion of the by incorporating environmentally Impact Institute of the Sustainable independent non-executive directors on sustainable practices into their Apparel Coalition, established to the Group Remuneration Committee. operations. Since 2015, the programme improve the environmental and social focused to promote best practice in impacts of the apparel and footwear Sustainable networks supply chain. and entrepreneurship industry. Future skills Recognised as the Best Trade Finance SMEs, entrepreneurs and mid- Emerging new technologies expose Bank and Most Innovative Bank by market companies play a key role in the skills gap of future generations as Global Trade Review (GTR) magazine, contributing to sustainable economic activities are relying more on robotics we continuously work with a wide growth and job creation. As they and artificial intelligence. In addition, range of customers, from small too face challenges arising from research indicates that only 33% of enterprises to mid-market companies climate change, digitalisation and adults worldwide are financially literate5 and large corporates, providing them globalisation, we are positioned to help and an estimated one third of wealth with the tools they need to function these companies grow sustainable inequality is attributed to a lack of efficiently. We aim to support the businesses and prosper in this rapidly financial information and awareness6. sustainable development of our changing economy. In addition to clients’ supply chains and foster new supporting entrepreneurs via current Our work relating to future skills business development and sustainable or new banking propositions provided focuses on two areas: increasing international growth of small and by Commercial Banking and Retail financial capability and employability. medium-sized enterprises (‘SMEs’) Business Banking, we intend to partner 4 UN Global Compact Decent Work in Global Supply and entrepreneurs. with key organisations, including Chain (www.unglobalcompact.org/take-action/action/ decent-work-supply-chains) To help increase sustainability in supply NGOs to collaborate on research and 5 S&P FinLit Survey (gflec.org/initiatives/sp-global- chains, we will further our work with other support mechanisms to foster finlit-survey/) 6 knowledge.wharton.upenn.edu/article/three- NGOs and corporate partners. With sustainable businesses. questions-major-implications-financial-well/

12 Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc Supporting Sustainable Growth

Financial capability is when people have the power to make the most Spotlight 3: The HSBC Water Programme of their money and use it to improve their lives. We will help customers, Water is a resource that is both essential to life and a fundamental driver of socio- employees and community members economic growth. It is vital to help build healthy communities and develop national build financial capability to help secure economies. It is estimated that every $1 invested in water provision and sanitation their financial futures. provides related returns of just under $5 to the economy overall8. An example of this is our long running However, this finite resource is under constant strain from population growth, partnership with Junior Achievement climate change and urbanisation, and by 2025 1.8 billion people are expected to Worldwide (‘JA’). Research7 shows be living in countries or regions with absolute water scarcity9. that those taught the financial basics Launched in 2012, the HSBC Water Programme has been working in partnership at an early age are more likely to be with Earthwatch, WaterAid, WWF, and local project partners to help tackle the employable and successful later in life, global water crisis through protecting water sources, educating communities, obtaining higher levels of education, supporting sustainable businesses, and providing opportunities for employees to career satisfaction, financial capability, engage with local environmental issues. and entrepreneurial activity. The JA Extended for three years until December 2019, the programme continues to More than Money programme, which protect five of the world’s most important river basins, and to date has provided includes digital and hands-on learning 1.65 million people with clean water and 2.5 million people with sanitation in six activities, is uniquely suited to provide countries across two continents. both teachers and students with the support they need to build up basics in financial capability, while inspiring Progress to date unsustainably can lead to deforestation, young people to dream big and HSBC values and welcomes resulting in environmental damage, become future savings and investment- constructive engagement with its threats to endangered species and minded entrepreneurs who will go on stakeholders, including NGOs and social conflict. In our April ESG Update, to positively impact our economy. wider civil society. We expect the we outlined our approach to palm oil depth and range of stakeholder and changes we have made to our Another area of focus includes dialogue at all levels within HSBC, policies, and our engagement with providing more financial awareness for including at a board level, to grow and the industries that produce and use our customers, such as the HSBC Beta become an increasingly important it. We have progressively raised the app. This app allows UK customers factor informing business decisions sustainability standards we apply to our to view bank accounts they have with that are taken. We have formalised our banking relationships, and as a result different providers. The HSBC Beta internal structures, including identifying have withdrawn from relationships app will give our customers a complete senior-level relationship owners for (see Figure 3). At the same time, we and joined-up view of their financial our more frequent NGO contacts, support the development of sustainable life, helping them track their spending to ensure civil society feedback is palm oil production. For further details, habits, and “nudge” them if they considered in our decision-making see page 24 of the April ESG update. exceed their spending limits. and in reviewing our sustainability risk The value of engagement Employability is a set of achievements, policies. We expect the depth and Since 2015, a growing number of understandings and attributes that range of this stakeholder dialogue to companies in the palm oil sector make individuals more likely to gain grow in coming years. have made commitments to No employment and be successful in Our sustainability risk policies cover Deforestation, No Peat and No their chosen occupations. Our aim agricultural commodities, chemicals, Exploitation (‘NDPE’). is to help people prepare for the defence, energy, forestry, freshwater changing world of work by supporting We have made our own commitment infrastructure, mining and metals, employment related skills development in this respect, incorporating NDPE UNESCO World Heritage Sites and in partnership with NGOs, our requirements into our agricultural Ramsar-designated wetlands. This employees, and our clients. commodities policy in February 2017, supplement highlights our progress on making our NDPE commitment at that We run many graduate programmes palm oil since our April ESG Update and time. We also required our customers internationally, with an aim to employ, showcases our lending and investment to make an NDPE commitment by develop and promote employees based defence policy. For further details June 2017. on merit, and provide a supportive and please visit our policies. inclusive working environment. Our As a result of adopting our updated apprenticeship schemes are one of Palm oil palm oil policy in February 2017, in the main ways we bring new talent Palm oil, the world’s main vegetable addition to those already compliant, 12 into the UK business today. As the oil, is used in a wide range of additional customers have made public first major UK bank to introduce a products, from margarine and biscuits, NDPE commitments. This is a direct national programme, we have enrolled to detergents and cosmetics. Its 7 “Standard & Poor’s Ratings Services Global Financial Literacy Survey,” 2014. over 2,700 candidates into our production can bring economic benefits, but when practised 8 Frontier Economics apprenticeship scheme since 2011. 9 UNESCO, 2012 www.unwater.org/water-facts/scarcity/

Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc 13 Supporting Sustainable Growth

result of our engagement and support clients that do not comply with our our potential impacts on communities in this area. updated February 2017 requirements. and on the environment are managed 31DEC16 30JUN17 sensitively. In 2000, HSBC decided WhenRetain engagement Close doesTotal not work Retain and CloseDefence Total Policy Retain Close Total 104 176 80 28 108 75 37 112 to withdraw progressively from the customers do not meet our criteria, we HSBC’s engagement with the defence financing of the manufacture and sale withdraw from relationships. We are equipment industry is underpinned by of weapons. As detailed in our Defence currently ending banking relationships the principles and values which drive Equipment Sector Policy, HSBC will not with 37 customers in the palm oil our overall approach to business. We provide financial services to customers sector. These are comprised of clients take a long-term and responsible view who solely or primarily manufacture or we had already decided to exit and of our activities and seek to ensure that sell weapons. In 2010, HSBC further FIGURE 3 explicitly excluded cluster bombs and Trends in HSBC customers in the palm oil sector anti-personnel mines. We will not HSBC CONFIDENTIAL CASES finance customers involved in any way by global business & function [check wording] 200 Retain = Customers meeting HSBC policy requirements. with these indiscriminate weapons. The Close = Customers not meeting HSBC policy requirements policy has undergone internal review Total 176 where we will end our banking relationship. and was again approved in 2014. CUSTOMER COMPLAINTS 150 HSBC Global Asset Management has Complaint types (RBWM) excluded investment in companies linked to the production and/or 369 40 69 615 9 Close 104 108 marketing of cluster munitions, anti- Product Product 112 Total 100 personnel33 mines% 4% and 6%depleted56% uranium1% features fees and 28 and policy charges 37 Close from all of its active fundamental equity % % 2424 111 and fixed income strategies since 1,102 Other TOTAL 2010. We extended this100% exclusion product 50 to our index and systematic active related 75 Retain complaints Retain 72 80 strategies in 2015. This applies to all % % 3131 3434 third party asset managers as well. The exclusionGlobal policy Banking also covers& Markets HSBC’s 0 passivelyCommercial managed Bankin fundsg which track HSBC proprietary indices, or which 31 DEC 2014 31 DEC 2016 30 JUNE 2017 Retail Banking & Wealth Management use an optimised replication approach. HSBC ends relationships with customers not meeting policy as soon as is possible when we are no longer Private Bank Number of Adjusted Adjusted contractually committed to loans not yet due to be repaid. There is an increase in palm oil customers from Since 2016, the policy also covers Customers Profit Before Revenue December 2016 due to our re-defined scope in our policy to include conglomerates of palm oil subsidiaries. index fundsOther which fully replicate the Tax ($m) ($m) index (i.e. buying all of the underlying CASE STUDY index constituents) and Exchange Retail Banking and Wealth Management 36m 5,33318,925 Traded Funds managed by HSBC. Full disinvestment by these funds is approx Corporate Knights: Best 50 Corporate Citizens Commercial Banking 2m 6,05212,887 expected to have been completed in In June, HSBC Bank Canada using publicly disclosed data verified 2017. The list of companies is compiled celebrated a significant rise in by each company. with assistance from a leading third- Global Banking & Markets 4,100 5,59714,919 the Best 50 Corporate Citizens in party research partner and is reviewed A key factor in HSBC Bank Canada’s Canada, a league table compiled semi-annually, in addition to conducting approx environmental performance Global Private Bank 289 1,757 by Corporate Knights, a Toronto- our own due diligence. 50k score was its progress as part based media, research and financial of the Group’s global operational The policy does not apply to products company focused on clean For further detail, see Annual Report and Accounts 2016, (page 43 and 48). sustainability strategy to reduce investments where HSBC acts on behalf capitalism. environmental impact. “Being in the of customers and where, consequently, Our Canadian bank, which we wholly top three makes us all so proud. For the underlying investment decision is own, was ranked third overall for us, sustainability is about always not made by us. corporate citizenship, up from 23rd improving and building our business the previous year. for the long term – doing what’s right Find out more for the bank, our customers and the The league table measures Toronto communities we serve.” Sandra For further information Stock Exchange listed Canadian Stuart, President and Chief Executive enterprises with revenues of more Sustainability at HSBC Officer, HSBC Bank Canada. than CAD $2bn using a suite of 14 Sustainability Risk and Policies key performance indicators, including For more information about Sustainable Finance ESG Investing greenhouse gas productivity, taxes Corporate Knights’ Best 50 Corporate Green Bonds & Global Banking paid, health and safety performance, Citizens visit: and Markets and pension fund quality. It applies a www.corporateknights.com/ rules-based, transparent approach, reports/2017-best-50/. Global Research/Climate Change Center of Excellence

14 Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc Financial Crime Risk Management

Today’s connected world creates new challenges. HSBC is committed to helping protect the integrity of the financial system on which millions of people depend.

Our scale and global footprint put us in one place. By mid-October, more In the first half of 2017, we invested than 222,000 employees had taken in a unique position, where we can make a positive contribution and be the training. In July 2017, we launched at the forefront of the fight against $1.6bn the latest stage in our multi-year financial crime. in regulatory and compliance employee campaign on financial programmes, up $168m compared crime risk. The campaign focuses on We have significantly stepped up our with the same period the previous year. helping employees understand the role efforts to keep fraud and financial everyone has to play in the fight against crime out of the financial system, financial crime. and continue to invest heavily. Our At the core of our approach are total investment in regulatory and having the right expertise, investing in Investing in technology compliance programmes in the first technology and working in partnership We have substantially improved our half of 2017 was $1.6bn, up $168m or with other organisations. Progress in IT infrastructure to help identify and 12% compared with the same period these areas is detailed below. analyse financial crime, having invested the previous year. $1bn in new and upgraded systems Having the right expertise since 2015. Innovation has an important Under the terms of our US deferred Our employees play an important role role to play, and we constantly explore prosecution agreement and related in the fight against financial crime. We technologies to help us build on our agreements and consent orders, we have built a dedicated team of financial existing capabilities. continue to take concerted action to crime specialists and consistently remediate anti-money laundering and encourage all employees to speak up Working with, or investing in, financial sanctions compliance deficiencies, when something does not meet the technology (fintech) firms is one including implementing our Global high standards we set, either internally way to achieve this. In May 2017, Standards programme to safeguard or for our customers. we announced that we had made an the bank and our customers against early stage investment in Quantexa, a financial crime. (For more information This year we have implemented a new technology company that analyses data on this, see HSBC’s Annual Report and target operating model for the Financial to create a single view of a customer Accounts 2016, page 66.) Crime Risk function which puts in place and identify their associated network to a sustainable structure at a global, detect and prevent money laundering. In August 2017, we completed a regional and country level, and across With Albion Ventures, a venture capital country-by-country assessment against all lines of business. We continue to firm, we co-led a $3.3m investment the core capabilities set out in our supplement the function’s leadership round. Quantexa’s system aims to spot financial crime risk framework. This team at the most senior levels by hiring potential money laundering by analysing gives us a clear view of our progress candidates experienced in areas such internal and publicly available data and priorities to help us to embed the as law enforcement and regulation. within a customer’s wider network, capabilities and integrate them fully into This includes recently appointing the including on social media and news our day-to-day operations. former CEO of AUSTRAC, Australia’s channels. After a successful pilot within Protecting a world of opportunity financial intelligence agency, and HSBC we are planning a wider rollout the former U.S. Homeland Security We have set out our commitment to in 2018. Attaché to the European Union. fighting financial crime in a new film Another example of our involvement for employees and customers at We have invested significantly to with fintech companies is our www.hsbc.com/financial-crime-risk, ensure employees are properly work with Ayasdi, a Silicon Valley- and on the HSBC channel on YouTube. equipped to combat financial crime. based company specialising in The film highlights our responsibility to This summer we relaunched and artificial intelligence, to improve our help protect the financial system for the refreshed our global mandatory learning understanding of the behaviour of the benefit of our customers and society. for all employees with a new training people and companies transacting Its message of ‘together protecting package called ‘My financial crime risk with our customers. This helps a world of opportunity’ aligns with responsibilities’, that brings together with unusual activity detection in HSBC’s purpose of connecting anti-money laundering, sanctions and transaction monitoring. A successful customers to opportunities. anti-bribery and corruption training pilot last year reduced the number

Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc 15 Financial Crime Risk Management

CASE STUDY

How asking the right questions strengthened a customer relationship

An Australian company had been a Commercial Banking customer since 2012. But its increasingly complex business structure, which included nominee companies with links to high-risk jurisdictions, became a concern for us. It was important for our relationship manager to understand why the business had been structured in such a way and uncover whether any criminal activity had taken place beneath the complexity of the business. We engaged with the customer, explaining the bank’s commitment to protecting its customers and society from financial crime. Carrying out a Customer Due Diligence (CDD) review helped us to understand the rationale for the structure and allowed us to obtain the necessary documentation to validate the company’s activities and mitigate any risks. The CDD exercise also helped us understand our client and their needs better. Our relationship with the client deepened and we were able to provide them with financial solutions in new markets and support them during their overseas expansion. of initial investigations by 20%, To share best practice and accelerate with no reduction in the number of the development of such partnerships, cases referred for more specialist we co-sponsored a major public report investigation. This increases our into the future of financial intelligence efficiency and allows us to target sharing, which was released in potential criminal activity more October. Titled The Role of Financial effectively. In 2017, we have begun Information-Sharing Partnerships in the to implement the software into our Disruption of Crime, it was published systems in North America, with plans by the Future of Financial Intelligence to roll it out on a region by region basis Sharing programme, part of the over the coming quarters. RUSI Centre for Financial Crime and Security Studies. The report is the first Working in partnership international and comparative study Governments, law enforcement of public/private financial information agencies and banks all have critical sharing partnerships to tackle roles to play in detecting, deterring and financial crime. It is available at preventing financial crime. By sharing www.future-fis.com. complementary information, they can better focus efforts to safeguard society. HSBC is a strong proponent of public- Find out more private partnerships and information- For further information about HSBC sharing initiatives. We play an active or and financial crime risk, please see founding member role in partnerships www.hsbc.com/financial-crime-risk in six countries, with three such partnerships formally commencing See videos that explain our work in since March 2017 – in Australia, fighting financial crime: Singapore and Hong Kong – joining Fighting Financial Crime: Fraud similar existing ones in the UK, the US Fighting Financial Crime: Human and Canada. trafficking

16 Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc Call out box 3 – Percentage of Snapshot+ survey respondents, by gender, which believe ‘the senior leadership in my area makes decisions that take people like me into consideration’.

Our Approach to Tax

We apply the spirit and the letter of the law in all territories where we operate.

HSBC seeks to maintain open and We have adopted the UK Code of HSBC manages tax risk by: transparent relationships with tax Practice for the Taxation of Banks. As • identifying the risks. authorities in all territories in which a consequence, we pay our fair share • ensuring the right controls are in it operates and continues to support of tax in the countries in which we place to prevent, manage and global initiatives to improve tax operate. We continue to strengthen our reduce risk. transparency, including: processes to ensure that our banking • setting policies and guidelines • The US Foreign Account Tax services are not associated with for managing tax risks. Compliance Act (‘FATCA’). any services known or suspected to facilitate tax evasion. We do not expect • providing support and guidance • The OECD Standard for Automatic BEPS or similar initiatives adopted by to staff to support the above Exchange of Financial Account national governments to adversely policies. Information (the ‘Common Reporting impact HSBC’s financial results. Standard’). • employing an experienced, professionally qualified in-house • The Capital Requirements Directive Tax governance tax team, supported by advice from IV (‘CRD IV’) Country by Country We manage tax risk in accordance external advisers where required. Reporting; for detail view website. with a formal tax risk management • The OECD Base Erosion and Profit framework, which itself forms Shifting (‘BEPS’) initiative. part of an overarching operational risk management framework. Find out more • The UK legislation on the corporate The operational risk management ProcessPr andocess Procedure andPr Pocessrocedure : 36% and : P36%rocedure : 36% criminal offence (‘CCO’) of failing to framework defines minimum For further information, please see Fees andFees Charges and Charges :Fees 12% and : 12% Charges : 12% prevent the facilitation of tax evasion. Tax transparency: standards and processes, and provides ServiceSer : 27%vice : 27%Service : 27% a governance structure for the www.hsbc.com/our-approach/risk-and- ProductPr Featuresoduct Features andProduct Benets and Features Benets : 3% and : 3% Benets : 3% Asia Asia Asia management of operational risk. responsibility/tax-transparency OthersOthers : 22% : 22%Others : 22%

FIGURE 4 FIGURE 4 FIGURE 4 FIGURE 5 FIGURE 5 FIGURE 5 FIGURE 6 FIGURE 6 FIGURE 6 Ta xes paidTa xines 20 paid16 in 20Ta16xes paid in 2016 Ta xes paidTa xbyes rpaidegion by rTaegionxes paid by region Ta xes collectedTa xes collected by regionTa byx ines r egion20 collected16 in 20 by16 region in 2016

Total $7.4bnTotal $7.4bn Total $7.4bn Total $7.4bnTotal $7.4bn Total $7.4bn Total $7.7bnTotal $7.7bn Total $7.7bn

$0.1bn $0.1bn $0.1bn $0.2bn $0.2bn $0.2bn $0.2bn $0.2bn $0.2bn $0.6bn $0.6$3.4bnbn $3.4bn$0.6bn $3.4bn $0.3bn $0.3$2.8bnbn $2.8bn$0.3bn $2.8bn $0.8bn $0.8$2.2bnbn $2.2bn$0.8bn $2.2bn

$0.9bn $0.9$1.2bnbn $1.2bn$0.9bn $1.2bn $0.8bn $0.8$2.4bnbn $2.4bn$0.8bn $2.4bn $1bn $2.1$1bnbn $2.1bn $1bn $2.1bn $1.2bn $1.2bn $1.2bn $0.9bn $0.9bn $0.9bn $1.4bn $1.4bn $1.4bn

Tax on profitsTax on profits Tax on profits Asia Asia Asia Asia Asia Asia UK bank levyUK bank levy UK bank levy UK UK UK Latin AmericaLatin America Latin America IrrecoverableIrrecoverable VAT VATIrrecoverable VAT Latin AmericaLatin America Latin America UK UK UK Employer Employertaxes taxes Employer taxes Rest of EuropeRest of Europe Rest of Europe North AmericaNorth America North America Other Other Other North AmericaNorth America North America Rest of EuropeRest of Europe Rest of Europe WitholdingWitholding taxes taxesWitholding taxes Middle EastMiddle and NorthEast and Africa NorthMiddle Africa East and North Africa Other Other Other

Taxes paid by HSBC relate to HSBC’s own tax liabilities including tax on profits earned, employer taxes, bank levy and other duties/levies such as stamp duty. Taxes collected by HSBC relate to certain taxes HSBC has collected on behalf of governments, including employee taxes and withholding taxes. For further detail visit ARA, 2016.

Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc 17 Update on Corporate Governance

We are committed to high standards of corporate governance, and are subject to corporate governance requirements in both the UK and Hong Kong.

A comprehensive report on our In April 2017, and Sam corporate governance practices is set Laidlaw retired from the Board at out on pages 132 to 182 of our 2016 the conclusion of the 2017 Annual Annual Report and Accounts 2016. General Meeting, while Paul Walsh also resigned from the Board to focus The of HSBC on other commitments. Jonathan Holdings plc (‘the Board’) aims to Symonds, who serves as Chairman promote the long-term success of the of the Audit Committee, succeeded company and deliver sustainable value Rachel Lomax as Senior Independent to its shareholders. Led by the Group Director. Jonathan also replaced Sam Chairman, the Board sets the strategy Laidlaw as interim chairman of the and risk appetite for the Group, Nomination Committee, a role which and approves capital and operating he relinquished to in plans presented by management September 2017. for the achievement of the strategic objectives. Implementation of the Also in April 2017, Pauline Van der Meer strategy is delegated to the Group Mohr was appointed chair of the Group Chief Executive. Remuneration Committee, and as chair of the Conduct & Values Committee. The Board comprises a majority of Jackson Tai was appointed as chair of independent non-executive Directors. the Group Risk Committee, succeeding Its role is to constructively challenge Joachim Faber who remains a management and help develop Committee member. proposals on strategy. The Board also reviews the performance of On 12 October, we announced that management in meeting agreed , Chief Executive of Retail goals and objectives and monitors the Banking and Wealth Management, will Group’s risk profile. succeed Stuart Gulliver as Executive Director and Group Chief Executive. During 2017, HSBC announced a This will be effective from 21 February number of changes to the Board, 2018 after Stuart has stepped down most notably the retirement of Group from both roles and retired from HSBC. Chairman, , after a career spanning 22 years with HSBC. This Directors’ biographies, which include included 15 years serving as Group their skills and experience, can Finance Director and seven years be found on our website at serving as Chairman of the Board. www.hsbc.com/about-hsbc/leadership. Douglas was succeeded by Mark Terms of Reference for each of the Tucker, who joined the Board as an Board’s Committees can also be independent non-executive director on found at www.hsbc.com/about- 1 September and assumed the role of hsbc/corporate-governance/board- non-executive Group Chairman from 1 committees. October. Mark is a former Group Chief Executive and President of AIA Group Limited and has a long track record of successful leadership of complex financial services businesses in both Asia and the UK.

18 Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc Further Information

In this section, we have provided further information on HSBC’s approach to ESG issues. It contains a quick guide to links to videos, further content, policies, and topics discussed in this document. Please visit the links to obtain a more in depth understanding of our initiatives covering the ESG issues that may be of interest to you.

Environmental, Social and Governance Update, Social April 2017 www.hsbc.com/our-approach Environment - Board Diversity Policy Environmental Policy - Community Investment Programmes www.hsbc.com/our-approach/measuring-our-impact - Diversity and Inclusion Policy www.hsbc.com/our-approach/sustainability/finance, - Ethical and Environmental Code of Conduct for Suppliers www.gbm.hsbc.com/solutions/sustainable-financing, - Health and Safety Policy www.global.assetmanagement.hsbc.com/about-us/ - Remuneration Practices and Governance responsible-investment - Statement on Human Rights Transition to low-carbon economy - Modern Slavery and Human Trafficking Statement - HSBC’s Green Bond Report - Tax Transparency - Global Asset Management Climate Change Policy - Our Charter - Global Asset Management Responsible Investing - Whistleblowing Policy - Global Equity Portfolio Carbon Footprint (Montreal Pledge) Visit HSBC Now YouTube Channel for stories from our - Global Banking and Markets Sustainable Financing colleagues around the world. - Global Research / Climate Change Centre of Excellence ‘Adrienne’s big game’ - Statement on Climate Change ‘Five ways we support our well-being at HSBC’ - UN Principles of Responsible Investment ‘Saving the planet, one tree at a time’ - UN Principles of Sustainable Insurance ‘Through the eyes or our people’ ‘Our leaders share their career stories’ Managing Risk www.hsbc.com/our-approach/risk-and-responsibility Governance - Environmental Policy www.hsbc.com/our-approach/risk-and-responsibility and - Sustainability Risk Policies www.hsbc.com/our-approach/measuring-our-impact - Equator Principles - Anti-Money Laundering Policy Statement - Introduction to Sustainability Risk Policies - Modern Slavery and Human Trafficking Statement - Statement on Climate Change - Political Engagement Statement - Sanctions Policy Statement Operational Impact - Statement of Anti-bribery Principles www.hsbc.com/our-approach/sustainability/operations - Statement on Conduct - Ethical and Environmental Code of Conduct for Suppliers - Statement on Public Policy Engagement - Key Facts (External benchmarks and environmental figures) - PwC Assurance Report Visit HSBC Safeguarding on YouTube for videos on data protection and financial crime. - Paper Sourcing Policy - Why do I need to provide more information about my business to HSBC? - What is financial crime and why should I be concerned? - How does proving where my money comes from help HSBC make banking safer?

Awards and recognitions www.hsbc.com/news-and-insight/awards

To the extent that we have not complied with the relevant provisions in the ESG Guide it is because we have chosen to focus on the issues which we consider are material to our stakeholders and on which we can have an impact. We will continue to develop and refine our reporting and disclosures on ESG issues in line with feedback received from stakeholders and in order to comply with the ESG Guide.

Environmental, Social and Governance (ESG) Supplement HSBC Holdings plc 19 © Copyright HSBC Holdings plc 2017 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Holdings plc. Published by Investor Relations, HSBC Holdings plc, Email: [email protected]

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