Annual Financial Report - Part 3

RNS Number : 5810Q

HSBC Holdings PLC

21 February 2023

 

Well-being

We want our colleagues to be at their best at work, so we invest significantly in their well-being and will continue to seek new ways to provide support. Guided by data and colleague feedback, the pillars of our well-being programme are mental, physical, financial and social well-being. In our employee Snapshot survey carried out in September, 70% of our colleagues said they believe HSBC cares about their well-being.

Mental well-being

Supporting our colleagues' mental health remains a top priority, with the Covid-19 pandemic still presenting mental health challenges in many countries. Our Snapshot survey revealed an increase in mental well-being, with 84% of colleagues rating their mental health as positive, compared with 82% in 2021. It also revealed that 73% of colleagues felt comfortable talking to their manager about their mental health, a slight increase from 72% in 2021.

We have continued to make telephone counselling services and Headspace, a meditation app, available to all colleagues globally. Use of these services increased by 3% and 28% in 2022, respectively.

More than 240,000 colleagues and contractors took part in mental health awareness training as part of global mandatory training. Our voluntary mental health e-learning has now been completed by 30,000 employees, with people managers making up 17% of the completions. We also provide an in-depth classroom course designed for line managers and those wanting to be mental health champions, which has been completed by 800 colleagues.

To celebrate World Mental Health Day, we ran a global awareness campaign on alleviating stigma and encouraging colleagues to feel able to speak up if they need help. Throughout October, we held over 100 virtual events, featuring internal and external experts providing advice on mental health and well-being related topics.

Physical well-being

The Snapshot survey revealed a decrease in physical well-being, with 71% of colleagues rating their physical health as positive, compared with 75% in 2021.

In February, we ran a survey about our employee benefits, which showed 37% of colleagues wanted more support with physical activity and exercise. In response, we ran a five-month pilot with 2,000 colleagues to test mobile apps that incentivise physical activity. The pilot showed that the use of apps and community challenges helped up to 70% of users increase their physical activity, to varying degrees. As a result, we are looking at expanding the initiative to more countries in 2023.

We have continued to provide access to private medical insurance in the majority of our countries and territories, covering 98% of permanent employees. In certain countries we provide on-site medical centres that the majority of colleagues can access.

We have enhanced fertility, adoption, and surrogacy benefits for our colleagues in the US and Canada. We are also expanding our gender dysphoria benefits for LGBTQ+ colleagues in the UK and Philippines from 2023.

Financial well-being

Our Snapshot survey revealed a decrease in financial well-being, with 60% of colleagues reporting positively, compared with 64% in 2021. We believe this is an impact of rising inflation and cost of living in many countries.

However, colleagues felt more supported to manage their financial well-being, at 62%, an increase of four points from 2021. The same survey revealed that 81% of colleagues felt they had the right skills and knowledge to manage their day-to-day finances, and 77% said they are well prepared to meet their financial goals.

Our benefits survey showed that 31% of colleagues want more support around financial education. In response, we have continued to promote our financial education programmes on healthy financial habits and saving strategies. Since their launch, over 2,400 colleagues have used these programmes.

We review our approach to employee share ownership plans in line with country demand, operational capacity and local legislation. In 2022, we expanded our global share plan to colleagues in Bahrain, Qatar and Kuwait, meaning that 90% of our people globally now have access to share ownership plans. We continue to look to offer the plan in new locations.

In the UK, we introduced a green car scheme to encourage colleagues to transition to electric vehicles and benefit from reduced running costs and CO2 emissions.

Social well-being

We introduced social well-being as a new pillar of our programme in 2022, to focus on social connections and work-life balance.

Snapshot surveys showed 75% of colleagues say they can integrate their work and personal life positively, a slight decrease compared with 76% in 2021. We will continue to facilitate this by enabling flexible working arrangements, including hybrid working, in line with our future of work initiative (see page 76). Colleagues feel more confident talking to their manager about work-life balance, with 80% saying they do, compared with 77% in 2021.

In 2021, we upgraded our At Our Best recognition online platform, which allows for real-time recognition and appreciation between colleagues. The upgrade enables colleagues to record and send video messages to accompany recognitions. In 2022, there were more than 1.2 million recognitions made, an 11% increase on 2021. We also enabled colleagues globally to donate their points directly to humanitarian relief agencies supporting those impacted by the war in Ukraine. To date more than 1,100 colleagues have made personal donations to this cause.

Awards 

CCLA Global 100 Mental Health Benchmark

Ranked number 1 global employer

Promoting a culture of well-being

In July 2022, we became a founding member of the World Wellbeing Movement, a coalition of global leaders from business, civil society and academia. A key objective of the movement is to develop a simple and universally acceptable standard for measuring well-being that leads to meaningful action. We believe that having a standard ESG indicator on well-being will improve transparency and enable organisations to better target actions to create positive change.

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Developing skills, careers and opportunities

Learning and skills development

We aim to build a dynamic environment where our colleagues can develop skills and undertake experiences that help them fulfil their potential. Our approach helps us to meet our strategic priorities and support our colleagues' career goals. 

Our resources

The way we work and the way we learn has changed, driven by the adoption of hybrid working styles and digital capabilities. We use a range of resources to help colleagues take ownership of their development and career, including: 

-  HSBC University, which is our home for learning and skills accessed online and through a network of training centres. Learning is organised through technical academies aligned to businesses and functions, complemented with enterprise-wide academies on topics of strategic importance; 

-  My HSBC Career Portal, which offers career development information and resources to help colleagues manage the various stages of their career, from joining through to career progression; and

-  HSBC Talent Marketplace, which is our online platform that uses artificial intelligence ('AI') to match colleagues interested in developing specific skills with opportunities that exist throughout our global network.

Learning foundations

We expect all colleagues, regardless of their contract type, to complete global mandatory training each year. This training plays a critical role in shaping our culture, ensuring a focus on the issues that are fundamental to our work - such as sustainability, financial crime risk, and our intolerance of bullying and harassment. New joiners attend our Global Discovery programme, which is designed to build their knowledge of the organisation and engage them with our purpose, values and strategy.

As the risks and opportunities our business faces change, our technical academies adapt to offer general and targeted development. Our Risk Academy provides learning for every employee in traditional areas of risk management such as financial crime risk, but also offers more specific development for those in high-risk roles and for emerging issues, such as climate risk, or the ethics and conduct of AI and big data.

Preparing for the future

Our approach to learning is skills based. Our academy teams work with businesses and functions to identify the key skills and capabilities they need now, and in the future. We use people analytics, strategic workforce planning, and learning needs analysis to identify current and future skills demand, and to help colleagues develop in new areas that match their aspirations and support career growth.

Throughout 2022 we continued to run skills campaigns to create the impetus for individual-led learning, and have used our skills influencer network of more than 1,800 colleagues to build engagement and enthusiasm around the Talent Marketplace, and opportunities for development. 

Evolving how we learn

During the Covid-19 pandemic, we strengthened our digital offering to enable colleagues to develop their skills in a hybrid environment. Our colleagues can access HSBC University online via our Degreed learning platform, using it to identify, assess and develop skills through internal and external courses and resources in a way which suits them.

Degreed materials range from short videos, articles or podcasts to packaged programmes or curated learning pathways that link content in a logical structure. By December, more than 187,000 colleagues were registered on the platform. In 2022, overall training volumes were 28.8 hours per FTE, up from 26.7 hours per FTE in 2021.

However, we recognise that most development happens while our colleagues work, through regular coaching, feedback and performance management. To enable even more opportunities for colleagues to grow in this way, our Talent Marketplace matches colleagues to projects and new experiences based on their aspirations and career goals. In 2022, we rolled the platform out to an additional 83,000 colleagues across 18 countries and territories. Over 150,000 colleagues now have access to the platform, and to date over 3,000 projects and networking requests have been facilitated, and over 70,000 hours of activity have taken place.

Identifying and retaining future talent 

The starting point to identifying talent is having a fair and inclusive recruitment process. To help managers hire in line with our principles, we have launched compulsory inclusive hiring training. In 2022, over 5,000 managers received the certification, in addition to 13,500 in 2021.

Our talent programmes have been designed to enable talented employees to make the successful transition into more complex roles and to support participants in planning for a long-term career at HSBC. Our key programmes include:

-  Accelerating Female Leaders, which increases the visibility, sponsorship and network of female participants. Colleagues are supported with development plans to help them prepare for the next level of leadership, and matched with sponsors from our senior leadership and external executive coaches; 

-  Accelerating into Leadership, which prepares participants for leadership roles through peer-based development activities, senior sponsorship and executive coaches. Topics of focus include network building, developing resilience and navigating the organisation. We measure the retention of colleagues post-programme to assess the success; and 

-  'UGrow', which is our programme that supports the retention and development of colleagues while strengthening our leadership pipeline. The programme offers masterclasses focused on career planning, driving results and adaptability for aspiring colleagues. 

Our global emerging talent programmes welcomed over 800 graduates and 600 interns to the organisation in 2022. Our programmes are a key enabler of our broader diversity goals (see page 74). In 2022, our graduate intake was 48% female, and comprised graduates from 46 nationalities and over 30 ethnicities. We welcomed our graduates with a three-day induction programme, which introduced them to key topics such as our purpose, values and strategy, as well as our role in delivering a sustainable future.

Training at HSBC 

6.3 million

Training hours carried out by our colleagues in 2022. (2021: 5.9 million)

28.8 hours per FTE

Training hours carried out per FTE in 2022. (2021: 26.7 hours)

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Energising our colleagues for growth

We are committed to offering colleagues the chance to develop their skills while building pipelines of talented colleagues to support the achievement of our strategic priorities.

It remains critical to our ability to energise for growth that we demonstrate the right leadership, and create the optimal conditions for our people to perform. Our leadership and culture is guided by our purpose, values and delivering our strategy. 

The Sustainability Academy

To support our ambitions to become net zero in our own operations by 2030, and to align our financed emissions to the Paris Agreement goal of net zero by 2050, we launched the Sustainability Academy in 2022. The academy is available to all colleagues across the Group and serves as a central point for colleagues to access learning plans and resources, and develop practical skills.

The academy has resources to help all colleagues understand broad topics such as climate change or biodiversity, and is supplemented with more advanced content for key groups of colleagues who are supporting customers through their transition. We intend to align content to support business outcomes by educating our colleagues on topics such as energy efficiency, renewable energy, sustainability and ESG reporting.

 As part of our strategy to align the provision of finance to the Paris Agreement, the Sustainability Academy is supporting our colleagues to build their knowledge and capability in the sectors in which we have begun to measure and set financed emissions targets, including the oil and gas, and power and utilities sectors. 

We will continue to update the academy with new research and content related to ESG issues, including those related to social and governance issues. 

Supporting our Asia wealth strategy 

At the heart of our ambition to offer best-in class international wealth management services to our customers is the accelerated expansion of our offering in Asia. To achieve this, we are providing opportunities for our colleagues to reskill and build career resilience through our Accelerating Wealth Programme. The programme offers a skills-based development plan for colleagues who are looking to pursue a career in wealth management. Participants on the programme are allocated 20% of their working week to focus on learning and skills development. They are then regularly assessed to ensure they are making progress with developing the right skills to meet our client needs.

We recognise the role that diverse experiences can bring to our customers, and have therefore ensured that the programme is open to colleagues from all global businesses and functions based in Asia.

Building leadership capabilities 

We have strengthened the training we give to leaders at all levels of the Group to ensure they are equipped with the skills and knowledge to energise and develop our colleagues.

We have continued the executive leadership programme for our most senior leaders, creating a programme of high-quality modules that draws on internal and external expertise. The programme focuses on the shifting expectations of leaders, embedding the clarity and alignment to achieve our goals and tackling strategic change. We complemented this with educational resources focused on the opportunities presented by Cloud, artificial intelligence, and blockchain technology.

Our Country Leadership Programme aims to prepare and develop future country CEOs and executives for highly complex roles. The programme builds the confidence and competence of leaders across themes such as managing cyber risk, building regulatory relationships, representing HSBC's net zero ambitions and upholding customer-centricity. Participants learn through simulation exercises and coaching from seasoned executives, subject matter experts and Board members.

Leadership development for our colleagues at managing director level includes new programmes that have been created in partnership with business schools and industry practitioners. Topics focus on a range of issues, including critical skills areas such as influence, inclusion, and Agile methodologies.

We recognise the importance of people managers in shaping the experience of our colleagues. We have revised our training for people managers to better support living our purpose, values and strategy, and to reflect the challenges of retaining talent. Our core leadership development programme is made up of four modules that are available in face-to-face and virtual formats. The programme is focused on the role and expectations of managers, how to design and organise work, how to handle relationships with employees and how to nurture a productive team environment.

Supporting UK emerging talent

In the UK, we have continued to broaden our emerging talent programmes beyond traditional graduate and internship schemes. Our programmes support those from non-traditional education backgrounds, and are supportive of our social mobility ambitions, outlined on page 75. In 2022, we provided over 180 apprenticeship opportunities for external and internal applicants. We have also provided over 600 structured work placements for secondary school students, and developed partnerships with Brampton Manor, Generating Genius and the #merky foundation to provide financial literacy support to over 6,400 14 to 16 year olds. We have recently launched a career accelerator programme, in partnership with Zero Gravity, which involves over 120 of our graduates providing career coaching and mentorship to university students. HSBC UK also uses its apprenticeship levy to support work opportunities at small and medium-sized business through a partnership with West Midlands Combined Authority. 

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Building customer inclusion and resilience

Our approach to customer inclusion and resilience

We believe that financial services, when accessible and fair, can reduce inequality and help more people access opportunities. We aim to play an active role in opening up a world of opportunity for individuals by supporting their financial well-being, and removing the different barriers that people can face in accessing financial services.

Access to products and services

We aim to provide innovative solutions that address the barriers people can face in accessing products and services. In 2022, we introduced a new process to help refugees fleeing the conflict in Ukraine to access the financial services they need to set up a new life in the UK. Over 9,000 Ukrainian refugees have now opened a bank account with us.

As part of our efforts to help vulnerable customers access digital services, since 2021, HSBC UK has given over 1,500 vulnerable customers a free tablet device. This allows customers who previously had no way of accessing our online or mobile banking services the ability to do so.

Making banking accessible

Number of no-cost accounts held for customers who do not qualify for a standard account or who might need additional support due to social or financial vulnerability.¹

1 The scope of this disclosure has expanded from 2021, where we only reported the number of accounts opened for homeless, refugees and survivors of human trafficking.

Supporting financial knowledge and education

We continue to invest in financial education content and features across different channels to help customers, colleagues and communities be confident users of financial services.

Between the beginning of 2020 and the end of 2022, we received over 4 million unique visitors to our global digital financial education content, achieving our 2019 goal. We will continue to engage customers with financial education content and build their financial capabilities through the introduction of personal financial management tools. Since launching a financial fitness score in the UK, 74,325 customers have used the tool to understand the healthiness of their finances based on details about their spending, borrowing and saving habits.

We support programmes that deliver financial education to our local communities. HSBC Life is sponsoring the Hong Kong Lutheran Social Service to develop the Health Dollar Fun App, to boost digital literacy among the elderly, enhance their physical well-being and encourage social interaction. Throughout 2021 and 2022, we also partnered with Injaz Al-Arab, member of JA Worldwide, to deliver our 'Saving for good' programme, which focuses on building the financial capability of low-income workers in Bahrain, Egypt, Kuwait, Qatar and the UAE. We have now supported over 1,700 individuals to grasp basic financial concepts such as budgeting, saving and investing through a combination of customised training courses and mentorship.

We also understand the importance of building financial capability in young people to ensure future resilience. In Mexico, we offer a podcast that covers a relevant financial educational theme in each episode. To date, the podcast has been downloaded more than 73,000 times.

In collaboration with BBC Children in Need, HSBC UK has worked with financial education charity Young Enterprise to adapt its award-winning Money Heroes programme for children and young people experiencing a range of issues and challenges in their lives. The education resources have been adapted to ensure they are accessible, with books available in braille and large-print, as well as British Sign Language signed videos, audiobooks and a new early-reader e-book.

Creating an inclusive banking experience

We aim to ensure that our banking products and services are designed to be accessible for customers experiencing either temporary or permanent challenging circumstances, such as disability, impairment or a major life event.

We are committed to becoming a digitally accessible bank so that our digital channels are usable by everyone, regardless of ability. We have been recognised by the charity AbilityNet as having the most accessible website compared with other local competitor banks in 10 out of 13 of our key Wealth and Personal Banking markets.

Support for customers extends beyond our digital channels. In recognition of the fact that not all disabilities are visible or immediately obvious to others, we have now joined the Hidden Disabilities Sunflower Lanyard Scheme in the UK and Hong Kong. The lanyard indicates that an individual may need additional support, help or a little more time. We also launched 'quiet hours' across all of our UK branches and 'quiet corners' at designated branches in Hong Kong, to provide a calmer and more inclusive environment.

Supporting women and minority-led businesses

We aim to support our diverse customers by opening up a world of opportunity for women and minorities.

In May 2022, we launched a Female Entrepreneur Fund that aims to provide $1bn in lending to female-owned businesses.

Other programmes include our Mujeres Al Mundo (Women of the World) programme in Mexico, which supports the personal and professional development of women as customers. Mujeres Al Mundo offers women exclusive benefits across financial products and services, discounts on workshops and programmes taught by the University Anahuac Mexico.

We have also begun lending from the $100m that we allocated in 2021 for companies founded and led by women and minorities through HSBC Ventures.

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Engaging with our communities

Building a more inclusive world

We have a long-standing commitment to support the communities in which we operate. We aim to provide people with the skills and knowledge needed to thrive in the post-pandemic environment, and through the transition to a sustainable future.

We are empowering our people and those in our communities to develop skills for the future. Through our charitable partnerships and volunteering opportunities, our people share their skills and create a positive impact in society.

Our global reach is our unique strength. Bringing together diverse people, ideas and perspectives helps us open up opportunities and build a more inclusive world.

Building community and future skills

Our Future Skills strategy, launched in 2018, has supported over 6.6 million people through more than $197m in charitable donations. Current projections from our charity partners indicate our support during 2022 reached more than 1.45 million people through donations of $41m.

In anticipation of global economies transitioning towards a low-carbon future, our colleagues and charity partners initiated programmes that help people and communities respond to opportunities and challenges through building relevant skills:

• In the Middle East, we partner with the Posterity Institute and the Arab Youth Council for Climate Change to develop an open-source curriculum for teaching sustainability skills in higher education institutions in the region.

• In Argentina, the Academia Solar programme aims to train students in design, installation and commissioning of photovoltaic solar energy systems.

• In India, the Babuji Rural Enlightenment and Development Society teaches rural farmers sustainable farming practices, including soil and water management, helping them to increase their income.

We also work with our charity partners around the world to promote employability and financial capabilities in disadvantaged communities, and to respond to local needs:

• We support The Prince's Trust Group to help marginalised young people in Australia, Canada, India, Malaysia, Malta and the UK to develop employable skills.

• Our award-winning partnership with the Scouts has led to the creation of the first ever Money Skills Activity Badge for Beaver and Cub groups in the UK.

• We support Feeding America to help users of food banks in the US get on-site job skill training.

• We work with the China Volunteer Service Foundation to improve the financial capability of elderly people in Beijing, Shanghai, and Guangzhou.

Our support for Covid-19 relief efforts also continued in 2022, with a door-to-door vaccination programme in Hong Kong aiming to help 10,000 elderly or people with disabilities.

Climate Solutions Partnership

Our Climate Solutions Partnership is a five-year $100m philanthropic initiative that aims to identify and remove barriers to scale for climate change solutions. Working with the World Resources Institute, WWF and over 50 local partners, our support focuses on start-up companies developing carbon-cutting technologies, nature-based solutions, renewable energy initiatives in Asia and the WWF-led Asia Sustainable Palm Oil Links programme. 

Since 2020, we have committed $95.8m of our $100m funding target to non-governmental organisation ('NGO') partners, supporting projects with the potential to make significant impacts in the mission to achieve a net zero, resilient and sustainable future.

Community engagement and volunteering

We offer paid volunteering days, and encourage our people to give time, skills and knowledge to causes within their communities. In 2022, our colleagues gave over 67,000 hours to community activities during work time.

Engagement with pressure groups

We aim to maintain a constructive dialogue on important topics that are often raised by campaigning organisations and pressure groups.

Charitable giving in 2022

Social, including Future Skills: 50%

Environment, including the Climate Solutions Partnership: 20%

Local priorities: 16%

Disaster relief and other giving: 14%

Total cash giving towards charitable programmes

$116.8 m

Hours volunteered during work time

> 67,000

People reached through our Future Skills programme

1.45m

Awards

Investor and Financial Education Awards 2022

Hong Kong

• IFEA (Corporate) Gold Award

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Governance

Acting responsibly

We remain committed to high standards of governance. We work alongside our regulators and recognise our contribution to building healthy and sustainable societies.

At a glance

Our relationship

We act on our responsibility to run our business in a way that upholds high standards of corporate governance.

Customer experience is at the heart of how we operate. It is imperative that we treat our customers well, that we listen, and that we act to resolve complaints quickly and fairly. We measure customer satisfaction through net promoter scores across each of our business lines, listen carefully to customer feedback so we know where we need to improve, and take steps to do this.

We are committed to working with our regulators to manage the safety of the financial system, adhering to the spirit and the letter of the rules and regulations governing our industry.

We strive to meet our responsibilities to society, including through being transparent in our approach to paying taxes. We also seek to ensure we respect global standards on human rights in our workplace and our supply chains, and continually work to improve our compliance management capabilities.

For further details of our corporate governance, see our corporate governance report on page 239.

In this section
Setting high standards of governance	How ESG is governed	We expect that our ESG governance approach is likely to continue to develop, in line with our evolving approach to ESG matters and stakeholder expectations.	Page	86
Human rights	Our respect for human rights	As set out in our Human Rights Statement, we strive for continual improvement in our approach to human rights.	Page	87
Customer experience	Customer satisfaction	While customer satisfaction improved during the year, we have work to do to improve our rank position against competitors.	Page	89
	How we listen	We aim to be open and transparent in how we track, record and manage complaints.	Page	90
Integrity, conduct and fairness	Safeguarding the financial system	We have continued our efforts to combat financial crime and reduce its impact on our organisation, customers and communities that we serve.	Page	92
	Whistleblowing	Our global whistleblowing channel, HSBC Confidential, allows our colleagues and other stakeholders to raise concerns confidentially.	Page	92
	A responsible approach to tax	We seek to pay our fair share of tax in all jurisdictions in which we operate.	Page	93
	Acting with integrity	We aim to act with courageous integrity and learn from past events to prevent their recurrence.	Page	93
	Conduct: Our product responsibilities	Our conduct approach guides us to do the right thing and to focus on the impact we have on our customers and the geographies in which we operate.	Page	94
	Our approach with our suppliers	We require suppliers to meet our compliance and financial stability requirements, as well as to comply with our supplier code of conduct.	Page	94
Safeguarding data	Data privacy	We are committed to protecting and respecting the data we hold and process, in accordance with the laws and regulations of the geographies in which we operate.	Page	95
	Cybersecurity	We invest in our business and technical controls to help prevent, detect and mitigate cyber threats.	Page	96

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Setting high standards of governance (TCFD)

How ESG is governed

The Board takes overall responsibility for ESG strategy, overseeing executive management in developing the approach, execution and associated reporting. Progress against our ESG ambitions is reviewed through Board discussion and review of key topics such as updates on our climate ambition and transition, customer experience and employee sentiment. The Board is regularly provided with specific updates on ESG matters, including the energy policy, human rights and employee well-being. Board members receive ESG-related training as part of their induction and ongoing development, and seek out further opportunities to build their skills and experience in this area. For further details of Board members' ESG skills and experience, see page 240. For further details of their induction and training in 2022, see page 252.

Given the wide-ranging remit of ESG matters, the governance activities are managed through a combination of specialist governance infrastructure and regular meetings and committees, where appropriate. These include the Group Disclosure and Controls Committee and Group Audit Committee, which provide oversight for the scope and content of ESG disclosures, and the Group People Committee, which provides oversight support for the Group's approach to performance management. For some areas, such as climate where our approach is more advanced, dedicated governance activities exist to support the wide range of activities, from sustainable finance solution development in the Sustainability Execution Review Group to climate risk management in the Climate Risk Oversight Forum.

The Group Chief Risk and Compliance Officer and the chief risk officers of our PRA-regulated businesses are the senior managers responsible for climate financial risks under the UK Senior Managers Regime. Climate risks are considered in the Group Risk Management Meeting and the Group Risk Committee, with scheduled updates provided, as well as detailed reviews of material matters, such as climate-related stress testing exercises.

The diagram on the right provides an illustration of our ESG governance process, including how the Board's strategy on climate is cascaded and implemented throughout the organisation. It identifies examples of forums that manage both climate-related opportunities and risks, along with their responsibilities and the responsible chair. The structure of the process is similar for the escalation of problems, with issues either resolved in a given forum or raised to the appropriate level of governance with appropriate scope and authority.

We expect that our ESG governance approach is likely to continue to develop, in line with our evolving approach to ESG matters and stakeholder expectations.

How HSBC's climate strategy is cascaded
Opportunities		Risks
Board level governance
HSBC Holdings Board
Group Executive Committee	Group Audit Committee		Group Risk Committee
Management level governance
ESG Committee Supports the development and delivery of the Group's ESG strategy, key policies and material commitments by providing oversight, coordination and management of ESG commitments and initiatives. Co-Chairs: Group Company Secretary and Chief Governance Officer, and Group Chief Sustainability Officer		Group Risk Management Meeting Receives updates on climate risk, and reviews climate risk appetite and top and emerging climate risks. Chair: Group Chief Risk and Compliance Officer
Supporting governance
Sustainability Execution Review Group Oversees the delivery of our ambition to provide and facilitate $750bn to $1tn of sustainable finance and investment, and realisation of commercial opportunities. Chair: Group Chief Executive		Climate Risk Oversight Forum Oversees global risk activities relating to climate risk management, including physical and transition risks. Equivalent forums have been established at regional level. Chair: Group Head of Risk Strategy and Macroeconomic Risk
Regional, global business and global functions

Examples of ESG-related management governance

The following governance bodies support management in its delivery of ESG activities.

Digital Business Services Executive Committee Oversees the global delivery of ESG activities within our own operations, services and technology elements of our strategy. Chair: Group Chief Operating Officer

Group Reputational Risk Committee Oversees global executive support for identification, management and ongoing monitoring of reputational risks. Chair: Group Chief Risk and Compliance Officer

Sustainability Target Operating Model Steering Committee Oversees the implementation of the Group's organisational plan for the internal infrastructure, both within the Sustainability function and the wider Group, to deliver our climate ambitions. Chair: Group Chief Sustainability Officer

Human Rights Steering Committee Oversees the Group's evolving approach to human rights and provides enhanced governance. Chair: Group Chief Risk and Compliance Officer

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Human rights

Our respect for human rights

As set out in our Human Rights Statement, we recognise the role of business in respecting human rights. Our approach covers all aspects of internationally recognised human rights and is guided by the UN Guiding Principles on Business and Human Rights ('UNGPs') and the OECD Guidelines for Multinational Enterprises.

Refreshing our salient human rights issues

I n 2022, building on an earlier human rights review that had identified modern slavery and discrimination as priority issues, we reviewed our salient human rights issues following the methodology set out in the UNGPs. These are the human rights at risk of the most severe potential negative impact through our business activities and relationships. It is important to understand these as inherent risks, based on the nature of our business. Identifying and regularly reviewing these risks helps us to validate and evolve our overall approach to human rights.

Through this review, we identified the following five human rights risks (salient human rights issues) inherent to HSBC's business globally:

-  Right to decent work: This covers freedom from forced labour including freedom from slavery and child labour and protection from inhumane, harsh or degrading treatment or punishment. It also includes the right to just and favourable conditions of work including the right to reasonable working hours, fair working conditions and pay. It also covers the right to health and safety at work, including appropriate living conditions for workers as well as protection of their mental and physical health and safety while at work.

-  Right to equality and freedom from discrimination: This covers the right to equal opportunity and freedom from discrimination on the basis of protected characteristics.

-  Right to privacy: This includes the right to protection against interference with privacy.

-  Cultural and land rights: This includes self-determination and the enjoyment of culture, religion and language, and the rights of indigenous people.

-  Right to dignity and justice: This includes freedom of opinion and expression and freedom from arbitrary arrest, detention or exile.

The assessment also considered our business activities and relationships in the context of our roles: as an employer; as a buyer of goods and services; as a provider of financial products and services to personal customers and, separately, to business customers; and as an investor, including all investment activities.

We assessed how each of these five roles might intersect with our five salient human rights issues. The table above shows the areas where we assessed severe negative impacts on human rights would be most likely to arise, in the absence of action to mitigate them. This additional analysis allows us to focus our efforts as we review the range of measures already in place to manage risks, and consider enhancements.

Stakeholder engagement

As part of the process of validating our assessment of our salient human rights issues, we engaged with a range of internal and external stakeholders. These included:

-  drawing on the experience of our employee groups, which gave us valuable feedback on human rights challenges in the workplace;

-  working with civil society groups with expertise in one or more of our salient human rights issues, who could represent the views of potentially impacted people;

-  interviewing of our largest investors to hear their assessments of the potential human rights impacts associated with the financial services industry, and we listened to their expectations of us in responding to the risks; and

-  discussing our salient human rights issues with some of our key suppliers, our large business customers and the companies in which we invest, to understand their views of human rights impacts in different parts of the world and to develop collaborative approaches to addressing those impacts.

These stakeholder engagements and input from external human rights experts led us to alter or extend our initial assessments in several ways. For example, our discussions with civil society groups helped us understand the potential impact of our investments on all five of our salient human rights issues. Engagement with investors in HSBC informed our assessment of the way in which our salient human rights issues overlap with our approach to climate change and our commitment to a just transition (see next page).

Our salient human rights issues

Illustration of HSBC Group's inherent human rights risks mapped to business activities.

Inherent human rights risks		HSBC activities
		Employer	Buyer	Provider of products and services		Investor1
				Personal customers	Business customers
Right to decent work	Freedom from forced labour		●		●	●
	Just and favourable conditions of work	●	●		●	●
	Right to health and safety at work	●	●	●	●	●
Right to equality and freedom from discrimination		●	●	●	●	●
Right to privacy		●		●		●
Cultural and land rights			●		●	●
Right to dignity and justice		●	●	●	●	●

¹ Investor includes our activities in HSBC Asset Management.

Our respect for human rights continued

Managing risks to human rights

In 2022, we began the process of adapting our risk management procedures to reflect what we learned from the work on salient human rights issues described above. This included the development of Group guidance on human rights, which incorporates the salient human rights issues assessment and provides colleagues with practical advice, including case studies, on how to identify, prevent, mitigate and account for how we address our impacts on human rights.

We incorporated additional human rights elements into our existing procurement processes and supplier code of conduct, and we extended existing human rights due diligence processes for suppliers and business customers. We continued to develop our in-house capability on human rights, including by launching online resources for all staff and delivering bespoke human rights training for 520 employees across our network.

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The actions we are taking to address these salient human rights issues are consistent with our values, and will help us to meet our commitments on diversity and inclusion, and those we have made under the UN Global Compact and the World Economic Forum metrics on risk for incidents of child, forced or compulsory labour.

For further details of the actions we have taken to respect the right to decent work, see our Annual Statement under the UK Modern Slavery Act at www.hsbc.com/modernslaveryact.

For further details of the actions taken to respect the right to equality and freedom from discrimination, see 'Our approach to diversity and inclusion' on page 74.

Sector policies

Some of our business customers operate in sectors in which the risk of adverse human rights impact is greater. Our sector policies for agricultural commodities, energy, forestry, mining and metals cover human rights issues such as forced labour, harmful or exploitative child labour, land rights, the rights of indigenous peoples, including 'free prior and informed consent', workers' rights, and the health and safety of communities.

Through our membership of international certification schemes such as the Forestry Stewardship Council, the Roundtable on Sustainable Palm Oil and the Equator Principles, we actively support the continual improvement of standards aimed at respecting human rights.

Our sector policies are reviewed periodically to ensure they reflect our priorities.

For further details of our policy prohibitions and other financing restrictions, see our sector-specific sustainability risk policies at www.hsbc.com/who-we-are/esg-and-responsible-business/managing-risk/sustainability-risk.

Financial crime controls

The risk of us causing, contributing or being linked to adverse human rights impacts is also mitigated by our financial crime risk management framework, which includes our global policies and associated controls.

For further details of how we fight financial crime, see www.hsbc.com/who-we-are/esg-and-responsible-business/fighting-financial-crime.

Other policies

HSBC's Principles for the Ethical Use of Data and Artificial Intelligence describe how we seek to respect rights to privacy while making use of these technologies.

Driving change

We continued to be active participants in industry forums, including the Thun Group of Banks, which is an informal group that seeks to promote understanding of the UNGPs within the sector.

HSBC has been an active member of the Mekong Club since 2016. We are a regular participant in its monthly financial services working group and use its informative typological toolkits, infographics, and other multimedia resources covering current and emerging human trafficking and modern slavery issues. Our Compliance teams regularly collaborate and engage with the Mekong Club in designing bank-wide knowledge sharing and training sessions.

Supporting those impacted and those potentially at risk

We continued to expand our Survivor Bank programme, which has now benefited over 2,000 survivors of modern slavery and human trafficking in the UK, and is a model for making financial services more accessible to vulnerable communities worldwide.

We built on this experience in developing access to banking services for customers in the UK and in Hong Kong with no fixed abode, providing over 4,000 accounts under these programmes.

We also responded to the devastating effects of the conflict in Ukraine by introducing a new process to help refugees to access the financial services they need to set up a new life in the UK. Over 9,000 people fleeing the conflict have opened a bank account with us.

For further details of our work to support vulnerable communities, see page 83.

Effectiveness

The table below includes indicative metrics we use to measure year-on-year continual improvement to our human rights processes.

Contracted suppliers who had either confirmed adherence to the code of conduct or provided their own alternative that was accepted by our Global Procurement function (%)	93%
No-cost accounts held for customers who do not qualify for a standard account or who might need additional support due to social or financial vulnerability	716,957
Employees who have received bespoke training on human rights	520
Votes against management for reasons including human rights1	87
Concerns raised related to bullying, harassment, discrimination and retaliation	1,159

1 The figure represents the number of resolutions at investee company shareholder meetings (including AGMs) where votes were cast against management for reasons related to human rights.

Working for a just transition

We aim to play a leading role in mobilising the transition to a global net zero economy, not just by financing it, but by helping to shape and influence the global policy agenda. When designing and implementing low-carbon pathways it is important to consider the communities and areas of the economy that will be facing the greatest challenges. This aligns closely with our commitments on human rights more broadly. This was demonstrated in June 2022 when HSBC and US fashion group PVH Corp. announced the first sustainable supply chain finance programme that includes human rights performance standards.

 For further details on this programme, see page 58. See also our paper on Just and Inclusive Climate Transition for investors at www.assetmanagement.hsbc.co.uk/-/media/files/attachments/common/news-and-articles/articles/campaign-2022-11-02-hsbc-responsible-investment-insights-q4-2022.pdf.

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Customer experience

We remain committed to improving customers' experiences. In 2022, we gathered feedback from over one million customers across our three global businesses to help us understand our strengths and the areas of focus. Our recommendation scores improved in more than 66% of our markets, although we still have work to do to improve our rank position against competitors.

Customer satisfaction

Listening to drive continual improvement

In 2022, we continued to embed our feedback system so we can better listen, learn and act on our customers' feedback. We use the net promoter score ('NPS') to provide a consistent measure of our performance. NPS is measured by subtracting the percentage of 'Detractors' from the percentage of 'Promoters'. 'Detractors' are customers who provide a score of 0 to 6, and 'promoters' are customers who provide a score of 9 to 10 to the question: 'On a scale on 0 to 10, how likely is it that you would recommend HSBC to a friend or colleague'.

We run studies that allow us to benchmark ourselves against other banks. In 2022, we expanded our surveys to 14 markets to cover India, France and Germany. We try to make it as easy as possible for customers to give us feedback, accelerating our use of digital real-time surveys to capture insight. By sharing this and other feedback with our front-line teams, and allowing them to respond directly to customers, we are improving how we address issues and realising opportunities.

Our WPB 'Customer in the room' programme launched in 2022 to bring our senior leadership closer to customers by providing them with direct access to customer feedback. The programme helps to demonstrate the impact of our decisions on our customers, and helps ensure we use customer feedback in all aspects of how we run our business.

How we fared

In WPB, our NPS increased in four of our six key markets, which were the UK, Hong Kong, mainland China and Singapore. Our NPS in Mexico remained unchanged, while our NPS in India saw a small decline. In Hong Kong, we were ranked in first place, with improved scores in wealth advisory, life insurance and investment products. Our PayMe payments app was also ranked in second place for digital wallets.

Our ranks in mainland China and India remained in the top three, while our rank in India declined to third place. Our NPS in India declined across the mobile app, branch and call centre channels. Our overall rank in Singapore improved, and we remained in the top three among our mass affluent and high net worth customers. Our rank in the UK remained unchanged, with improvements in our loan products and wealth advisory scores. However, customers told us we needed to focus more on making digital platforms more accessible; making payments easier; improving our account opening experience; and helping customers better monitor their spending. We have made a commitment to invest in making improvements in these areas.

In our private bank, our global NPS decreased to 25, compared with 31 in 2021. This was largely due to a decrease in our scores in Hong Kong, the US and Luxembourg, with mainland China and Taiwan now included in the overall score.

In CMB, our NPS increased in four of our six key markets, which were Hong Kong, mainland China, Singapore and Mexico. Our NPS declined in the UK and India. Our rank positions in Hong Kong, India, mainland China, Singapore and Mexico either improved compared with 2021, or were in the top three against competitors. However, our rank in India declined to third place. This was driven by a decline in NPS among our Business Banking customers. In the UK, our overall rank remained unchanged. We were ranked in the top three among our large corporate and mid-market enterprise customers in the UK, and we saw a small decline in NPS among our Business Banking customers. We continue to see some challenges in service delivery, particularly for our Business Banking customers. Among other initiatives, we have been working hard to resolve telephony resourcing, which has impacted our responsiveness.

In GBM, our global NPS improved from 13 to 17 points. Our global rank position remained in fifth place. We continued to be ranked in the top three against competitors in MENA, while our US rank improved. Our digital satisfaction score fell marginally by one point. We remained ranked first for the quality of our digital trade finance platforms.

Number of markets in top three or improving rank1
	2022
WPB	4 out of 6
CMB	5 out of 6

1 In 2022, we updated the markets we measure our rank positions for both our WPB and CMB businesses to align with executive incentive scorecards. They comprise: the UK, Hong Kong, Mexico, mainland China, India and Singapore. Rank positions are provided using data gathered through third-party research agencies

Acting on feedback

We continued to focus on improving our products and services to enable better customer experiences.

Across WPB, we launched our Global Money proposition, initially in the UK, which allows customers to open a multi-currency account and be able to use it within minutes. We also introduced a new mobile account opening journey in Singapore in response to preferences for mobile-first experiences.

In CMB, we deployed digital onboarding solutions to 12 markets in 2022, using external data sourcing to streamline client and colleague journeys. These deliveries increased our digital penetration by 14% from 2021, extending our digital products and services to more customers globally. Through using technology to digitise our operations, there was close to a 6% increase in 2022 in trade transactions initiated digitally by our customers, and nearly a 62% increase in payments completed using the HSBCnet mobile app.

In response to client feedback, we made a number of changes to our client coverage model in GBM during 2022. We reshaped our Institutional Client Group, particularly our approach to financial sponsors, sovereign wealth funds and global investors. We enhanced our corporate multinational model to focus on our largest relationships through regional account managers. We also launched a series of transaction banking solutions to improve the experience for our clients, and created a new digital collaboration layer to drive clearer accountability and coordination of global teams when delivering these solutions.

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How we listen

To improve how we serve our customers, we must be open to feedback and acknowledge when things go wrong. We have adapted quickly to support our customers facing new challenges and new ways of working, especially as a result of Covid-19-related lockdown restrictions.

We aim to be open and consistent in how we track, record and manage complaints, although as we serve a wide range of customers - from personal banking and wealth customers to large corporates, institutions and governments - we tailor our approach in each of our global businesses. As the table on the right demonstrates, we have a consistent set of principles that enable us to remain customer-focused throughout the complaints process.

For further details on complaints volumes by geography, see our ESG Data Pack at www.hsbc.com/esg.

How we handle complaints
Our principles	Our actions
Making it easy for customers to complain	Customers can complain via the channel that best suits them. We provide a point of contact along with clear information on next steps and timescales.
Acknowledging complaints	All colleagues welcome complaints as opportunities and exercise empathy to acknowledge our customers' issues. Complaints are escalated if they cannot be resolved at first point of contact.
Keeping the customer up to date	We set clear expectations and keep customers informed throughout the complaint resolution process via their preferred channel.
Ensuring fair resolution	We thoroughly investigate all complaints to address concerns and ensure the right outcome for our customers.
Providing available rights	We provide customers with information on their rights and the appeal process if they are not satisfied with the outcome of the complaint.
Undertaking root cause analysis	Complaint causes are analysed on a regular basis to identify and address any systemic issues and to inform process improvements.

Wealth and Personal Banking ('WPB')

In 2022, we received approximately 1.2 million complaints from customers. The ratio of complaints per 1,000 customers per month in our large markets decreased slightly from 2.4 to 2.3.

In the UK, complaints fell 8% partly due to a decline in transaction disputes, which had risen during the Covid-19 pandemic. The reduction in these complaint volumes can also be attributed to journey improvements we made to deal with these disputes more quickly. We continue to be focused on improving the customer experience to reduce complaint volumes further during 2023.

The increase in complaints in Hong Kong was mainly related to reduced operations in our branches during Covid-19-related restrictions, an increase in fraudulent activities, and the migration by customers towards new ways of accessing and using our digital platforms. We are addressing these by seeking to improve our digital capabilities, timely staff reinforcement, enhanced guidance of how to use our digital platforms and improved customer journeys.

The decrease in complaints in Mexico was driven by improvements in fraud detection, as our fraud teams took actions to protect customers, including carrying out an upgrade to a monitoring tool for credit and debit cards and making adjustments to fraud rules.

In our private bank in 2022, we received 331 complaints, a 23% decrease on 2021, largely due to the reduction in administration and service issues. Within this category a high proportion were attributable to processing or client reporting delays/errors. In 2022, the private bank resolved 344 complaints.

WPB complaint volumes¹ (per 1,000 customers per month)

		2022	2021
Total2		2.3	2.4
UK3	→	1.4	1.4
Hong Kong3	↑	1.0	0.7
Mexico3	↓	5.1	5.5

1 A complaint is any expression of dissatisfaction about WPB's activities, products or services where a response or resolution is explicitly or implicitly expected.

2 Markets included: Hong Kong, mainland China, France, the UK, UAE, Mexico, Canada and the US.

3 The UK, Mexico and Hong Kong make up 86% of total complaints.

Acting on feedback

In 2022, we launched a Group-wide plan to deliver an improved experience for our customers around the world. The plan will strengthen our capabilities to hear, understand and act on what our customers are telling us on a regular basis. Across markets we enhanced our measurement and tracking capabilities, and developed the skills and tools our colleagues need to improve their customer experience each day. We also sought to standardise our customer-focused approach in our processes. 

For our colleagues focused on improving our customers' experiences, we enhanced and launched regular forums in 15 of our key markets to ensure systematic reviews are carried out to prioritise feedback and implement improvements quickly regarding our customers' online and offline experiences. This allows us to have a structured approach to manage feedback.

In Hong Kong, we analyse customer feedback and detect their pain points at an early stage through a feedback mechanism. Our colleagues are now able to reach out to our customers with unhappy experiences proactively to resolve their outstanding issues. 

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How we listen continued

Commercial Banking ('CMB')

In 2022, we received 62,995 customer complaints, a decrease of 23.4% from 2021. Of the overall volumes, 78.1% came from the UK and 12.9% from Hong Kong. The most common complaint related to operations, namely payment processing errors and delays.

The reduced volume of received complaints in the UK was largely as a result of a reduction in Covid-19-related complaints. This was mainly due to the fact we received fewer complaints related to the Bounce Back Loan scheme, and we also resolved the under-resourcing in UK servicing centres, which had led to delays in customer support in 2021 and into the first half of 2022.

In Hong Kong, volumes were higher in the first half of the year due to the consequences of Covid-19-related restrictions that placed stress on servicing centre capacity. Additional recruiting of servicing staff, improvements in the customer due diligence policy and the payment investigations process helped to reduce complaints volumes in the second half of the year, resulting in annual volumes that were in line with 2021.

We resolved 65,018 complaints globally in 2022. The average resolution time for complaints reduced by 23% to an average of 5.7 days, which is within our global target of 20 days.

CMB complaint volumes¹ (000s)

		2022	2021
Total		63	82.2
UK	↓	49.2	67.1
Hong Kong	↓	8.1	8.2

Acting on feedback

In 2022, we continued to invest in our client feedback tool, moving our products and local operations onto the platform. The Global Payments Solutions business adopted the tool during the year, and CMB staff in Hong Kong and India are due to begin logging and managing complaints in early 2023.

In late 2022, we also introduced new reporting functionality for complaints logged on the tool, which will update complaints on a daily basis, and enable colleagues responsible for managing complaints within markets and product teams to more closely manage volumes and operations.

We seek to ensure that we treat customers fairly when managing complaints, especially those who may be considered vulnerable or who have enhanced care needs. In 2022, we reported 865 complaints associated with such customers and have managed these closely to ensure fair outcomes for the customer.

Global Banking and Markets ('GBM')

In 2022, we received 2,127 customer complaints in Global Banking, a decrease of 8% from 2021.

Of the overall Global Banking complaints volumes, 45.6% were from complaints in Europe and 28.0% came from the MENA region. With regard to the types of complaint, 82% for Global Banking related to servicing and payment processing, which is in line with previous years.

In the Markets and Securities Services business, complaint volumes decreased by 6% from 2021. Of the overall Markets and Securities Services complaint volumes, 48% were in Asia and 43% in Europe. Our Markets and Securities Services business remains focused on providing a high standard of client service and commitment to resolving issues in a timely manner, with 93% closed within our service standards.

GBM complaint volumes¹

		2022	2021
Total		2,419	2,619
Global Banking2	↓	2,127	2,310
Global Markets and Securities Services	↓	292	309

Acting on feedback

We have continued to invest in our client feedback tool to create a consistent and streamlined experience for front-line staff in Global Banking and Markets and the wholesale businesses globally. In the fourth quarter, we launched a new reporting module driven from our client feedback tool, which will provide real-time complaints volumes, complaint details and operational metrics for our complaints users. This additional information will enable management to respond to complaints volumes.

1 Globally, a complaint is any expression of dissatisfaction, whether justified or not, relating to the provision of, or failure to provide, a specific product or service or service activity. Within the UK, a complaint is any expression of dissatisfaction - whether justified or not - about our products, services or activities which suggests we have caused (or might cause) financial loss, or material distress or material inconvenience.

2 Global Banking also includes Global Payments Solutions (previously known as Global Liquidity and Cash Management) and complaints relating to payment operations, which is part of Digital Business Services.

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Integrity, conduct and fairness

Safeguarding the financial system

We have continued our efforts to combat financial crime and reduce its impact on our organisation, customers and the communities that we serve. Financial crime includes fraud, bribery and corruption, tax evasion, sanctions and export control violations, money laundering, terrorist financing and proliferation financing.

We are committed to acting with integrity, and have a financial crime risk management framework that is applicable across all global businesses and functions, and all countries and territories in which we operate. The financial crime risk framework, which is overseen by the Board, is supported by our financial crime policies that are designed to enable adherence to applicable laws and regulations globally. Annual mandatory training is provided to all colleagues, with additional targeted training tailored to certain individuals. We carry out regular risk assessments, identifying where we need to respond to evolving financial crime threats, as well as monitoring and testing our financial crime risk management programme.

We continue to invest in new technology, including through the deployment of a capability to monitor correspondent banking activity, the enhancements to our fraud monitoring capability and our trade screening controls, and the application of machine learning to improve the accuracy and timeliness of our detection capabilities. These new technologies should enhance our ability to respond effectively to unusual activity and be more granular in our risk assessments. This helps us to protect our customers, the organisation and the integrity of the global financial system against financial crime.

Our anti-bribery and corruption policy

Our global anti-bribery and corruption policy requires that all activity must be: conducted without intent to bribe or corrupt; reasonable and transparent; considered to not be lavish nor disproportionate to the professional relationship; appropriately documented with business rationale; and authorised at an appropriate level of seniority. Our global anti-bribery and corruption policy requires that we identify and mitigate the risk of our customers and third parties committing bribery or corruption. Among other controls, we use customer due diligence and transaction monitoring to identify and help mitigate the risk that our customers are involved in bribery or corruption. We perform anti-bribery and corruption risk assessments on third parties that expose us to this risk.

The scale of our work

Each month, on average, we monitor over 1.2 billion transactions for signs of financial crime. During 2022, we filed over 73,000 suspicious activity reports to law enforcement and regulatory authorities where we identified potential financial crime. In addition, we screen approximately 117 million customer records monthly for sanctions exposure.

99%

Total percentage of employees who have received financial crime training, including on anti-bribery and corruption.

Whistleblowing

We want colleagues and stakeholders to have confidence in speaking up when they observe unlawful or unethical behaviour. We offer a range of speak-up channels to listen to the concerns of individuals and have a zero tolerance for acts of retaliation.

Listening through whistleblowing channels

Our global whistleblowing channel, HSBC Confidential, is one of our speak-up channels, which allows our colleagues and other stakeholders to raise concerns confidentially and, if preferred, anonymously (subject to local laws). In most of our markets, HSBC Confidential concerns are raised through an independent third party, offering 24/7 hotlines and a web portal in multiple languages. We also provide and monitor an external email address for concerns about accounting, internal financial controls or auditing matters ([e-mail]). Concerns are investigated proportionately and independently, with action taken where appropriate. This can include disciplinary action, dismissal, and adjustments to variable pay and performance ratings.

We promote our full range of speak-up channels to colleagues to help ensure their concerns are handled through the most effective route. In 2022, 18% fewer concerns were raised through HSBC Confidential compared with 2021. Of the concerns investigated through the HSBC Confidential channel in 2022, 83% related to behaviour and conduct, 11% to security and fraud risks, 6% to compliance risks and less than 1% to other categories.

The Group Audit Committee has overall oversight of the Group's whistleblowing arrangements, and the chair of the Group Audit Committee acts as HSBC's whistleblowers' champion with responsibility for ensuring and overseeing the integrity, independence and effectiveness of the organisation's policies and procedures. 

Compliance sets the whistleblowing policy and procedures, and provides the Group Audit Committee with periodic updates on their effectiveness. Specialist Compliance teams and investigation functions own whistleblowing controls, with monitoring in place to determine control effectiveness.

For further details of the role of the Group Audit Committee in relation to whistleblowing, see page 266.

HSBC Confidential concerns raised in 2022:

1,817

(2021: 2,224)

Substantiation rate of concerns investigated through HSBC Confidential in 2022:

41%

(2021: 42%)

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A responsible approach to tax

We seek to pay our fair share of tax in all jurisdictions in which we operate and to minimise the likelihood of customers using our products and services to evade or inappropriately avoid tax. We also abide by international protocols that affect our organisation. Our approach to tax and governance processes is designed to achieve these goals.

Through adoption of the Group's risk management framework, we seek to ensure that we do not adopt inappropriately tax-motivated transactions or products, and that tax planning is scrutinised and supported by genuine commercial activity. HSBC has no appetite for using aggressive tax structures.

With respect to our own taxes, we are guided by the following principles:

• We are committed to applying both the letter and spirit of the law. This includes adherence to a variety of measures arising from the OECD Base Erosion and Profit Shifting initiative.

• We seek to have open and transparent relationships with all tax authorities. Given the size and complexity of our organisation, which operates across over 60 jurisdictions, a number of areas of differing interpretation or disputes with tax authorities exist at any point in time. We cooperate with the relevant local tax authorities to mutually agree and resolve these in a timely manner.

• We have applied the OECD/G20 Inclusive Framework Pillar 2 guidance to identify those jurisdictions in which we operate that have nil or low tax rates (15% or below). We have identified seven such jurisdictions in which we operated during 2022 that may be impacted by adjustments required under the Pillar 2 Framework. We continually monitor the number of active subsidiaries within each jurisdiction as part of our ongoing entity rationalisation programme. We seek to ensure that our entities active in nil or low tax jurisdictions have clear business rationale for why they are based in these locations and appropriate transparency over their activities.

With respect to our customers' taxes, we are guided by the following principles:

• We have made considerable investments to support external tax transparency initiatives and reduce the risk of banking services being used to facilitate customer tax evasion. Initiatives include the US Foreign Account Tax Compliance Act, the OECD Standard for Automatic Exchange of Financial Account Information ('Common Reporting Standard'), and the UK legislation on the corporate criminal offence of failing to prevent the facilitation of tax evasion.

• We implement processes that aim to ensure that inappropriately tax-motivated products and services are not provided to our customers.

Our tax contributions

The effective tax rate for the year of 4.9% was reduced by 14.3% by the recognition of previously unrecognised deferred tax assets in the UK and France in light of improvements in forecast profits in these jurisdictions. Further details are provided on page 357. The UK bank levy charge for 2022 of $13m is lower than the charge of $116m for 2021 as it includes adjustments made to prior period UK bank levy charges recognised in the current year.

As highlighted below, in addition to paying $5.5bn of our own tax liabilities during 2022, we collected taxes of $10.2bn on behalf of governments around the world. A more detailed geographical breakdown of the taxes paid in 2022 is provided in the ESG Data Pack.

 

$2,429m Tax on profits 2021: $2,711m	$361m Withholding taxes 2021: $366m
$1,041m Employer taxes 2021: $1,125m	$314m Bank levy 2021: $479m
$1,152m Irrecoverable VAT 2021: $1,315m	$232m Other duties and levies1 2021: $278m

1 Other duties and levies includes property taxes of $94m (2021: $126m)

 

$2,745m Europe 2021: $3,170m	$1,894m Asia-Pacific 2021: $2,077m
$259m Middle East and North Africa 2021: $236m	$207m North America 2021: $469m
$424m Latin America 2021: $322m

$4,197m Europe 2021: $3,177m	$3,274m Asia-Pacific 2021: $3,584m
$67m Middle East and North Africa 2021: $78m	$1,129m North America 2021: $1,081m
$1,493m Latin America 2021: $1,343m

Acting with integrity

We aim to act with courageous integrity and learn from past events to prevent their recurrence. We recognise that restoration of trust in our industry remains a significant challenge, but it is a challenge we must continue to pursue. We owe this not just to our customers and to society at large, but to our colleagues to ensure they can be rightly proud of the organisation where they work. We aim to make decisions based on doing the right thing for our customers and never compromising our ethical standards or integrity.

Further information regarding the measures that we have taken to prevent the recurrence of past mistakes can be found at www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-and-policies.

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Conduct: Our product responsibilities

Our conduct approach guides us to do the right thing and to focus on the impact we have for our customers and the financial markets in which we operate. It is embedded into the way we design, approve, market and manage products and services, with a focus on five clear outcomes:

-  We understand our customers' needs.

-  We provide products and services that offer a fair exchange of value.

-  We service customers' ongoing needs, and put it right if we make a mistake.

-  We act with integrity in the financial markets we operate in.

-  We operate resiliently and securely to avoid harm to customers and markets.

We train all our staff on our approach to conduct, helping to ensure our conduct outcomes are part of everything we do.

Designing products and services

Our approach to product development is set out in our policies, and provides a clear basis on which informed decisions can be made. Our policies require that products must be fit-for-purpose throughout their existence, meeting regulatory requirements and associated conduct outcomes.

Our approach includes:

-  designing products to meet identified customer needs;

-  managing products through governance processes, helping to ensure they meet customers' needs and deliver a fair exchange of value;

-  periodically reviewing products to help ensure they remain relevant and perform in line with expectations we have set; and

-  improving, or withdrawing from sale, products which do not meet our customers' needs or no longer meet our high standards.

Meeting our customers' needs

Our policies and procedures set standards to ensure that we consider and meet customer needs. These include:

-  enabling customers to understand the key features of products and services;

-  enabling customers to make informed decisions before purchasing a product or service; and

-  ensuring processes are in place for the provision of advice to customers.

They help us provide the right outcomes for customers, including those with enhanced care needs. This helps us to support customers who are more vulnerable to external impacts, including the current cost of living crisis (see 'Supporting our customers facing a rising cost of living' on page 15).

Product governance

Our product governance arrangements cover the entire lifecycle of the product. This helps ensure that our products meet our policy requirements before we sell them. It also allows continued risk-based oversight of product performance against the intended customer outcomes.

When we decide to withdraw a product from sale, we aim to consider the implications for our existing customers, and agree actions to help them achieve a fair outcome where appropriate.

Financial promotion

Our policies help to ensure that in the sale of products and services, we use marketing and product materials that support customer understanding and fair customer outcomes. This includes providing information on products and services that is clear, fair and not misleading. We also have controls in place to ensure our cross-border marketing complies with relevant regulatory requirements.

Our approach with our suppliers

We maintain global standards and procedures for the onboarding and use of third-party suppliers. We require suppliers to meet our compliance and financial stability requirements, and to comply with our supplier code of conduct.

Sustainable procurement

In October 2022, we introduced an internal sustainable procurement procedure to set out the minimum sustainability requirements for procurement activity. This helps us to manage the risks related to sustainability in our supply chain, and balance the social, environmental and economic considerations in procurement decisions.

Supplier code of conduct

We have a supplier code of conduct, revised in 2022, which sets out our commitments to the environment, diversity and human rights, and which outlines the minimum commitments we expect of our suppliers on these issues.

We formalise commitment to the code with clauses in our supplier contracts, which support the right to audit and act if a breach is discovered.

At the end of 2022, 93% of approximately 9,600 contracted suppliers had either confirmed adherence to the supplier code of conduct or provided their own alternative that was accepted by our Global Procurement function.

Managing environmental and social risk

In 2022, we updated our ESG reputational risk assessment tool to identify the environmental and social risks for suppliers that are considered to be in sectors with high ESG risk. Previously, the assessment was applied to suppliers with higher value contracts only. The tool provides an ESG reputational risk score for the supplier. A high-risk score results in a further review to establish whether we are able to mitigate the risk and onboard the supplier.

For further details of the number of suppliers by geographical region, see the ESG Data Pack at www.hsbc.com/esg.

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Safeguarding data

Data privacy

We are committed to protecting and respecting the data we hold and process, in accordance with the laws and regulations of the markets in which we operate.

Our approach rests on having the right talent, technology, systems, controls, policies and processes to help ensure appropriate management of privacy risk. Our Group-wide privacy policy and principles aim to provide a consistent global approach to managing data privacy risk, and must be applied by all of our global businesses and global functions. Our privacy principles are available at www.hsbc.com/who-we-are/esg-and-responsible-business/managing-risk/operational-risk.

We conduct regular employee training and awareness sessions on data privacy and security issues throughout the year. This includes global mandatory training for all our colleagues, with additional training sessions, where needed, to keep up to date with new developments in this space.

We provide transparency to our customers and stakeholders on how we collect, use and manage their personal data, and their associated rights. Where relevant, we work with third parties to help ensure adequate protections are provided, in line with our data privacy policy and as required under data privacy law. We offer a broad range of channels in the markets where we operate, through which customers and stakeholders can raise concerns on the privacy of their data.

Our dedicated privacy teams report to the highest level of management on data privacy risks and issues, and oversee our global data privacy programmes. We review data privacy regularly at multiple governance forums, including at Board level, to help ensure appropriate challenge and visibility for senior executives. Data privacy laws and regulations continue to evolve globally. We continually monitor the regulatory environment to ensure we respond appropriately to any changes.

As part of our three lines of defence model, our Global Internal Audit function provides independent assurance as to whether our data privacy risk management approaches and processes are designed and operating effectively. In addition, we have established data privacy governance structures, and continue to embed accountability across all businesses and functions.

We continue to implement industry practices for data privacy and security. Our privacy teams work closely with our data protection officers, industry bodies and research institutions to drive the design, implementation and monitoring of privacy solutions. We conduct regular reviews and privacy risk assessments, and continue to develop solutions to strengthen our data privacy controls.

We continue to enhance our internal data privacy tools to improve accountability for data privacy. We have procedures to articulate the actions needed to deal with data privacy considerations. These include notifying regulators, customers or other data subjects, as required under applicable privacy laws and regulations, in the event of a reportable incident occurring.

Intellectual property rights practices

We have policies, controls and guidance to manage risk relating to intellectual property. This is to help ensure that intellectual property is identified, maintained and protected appropriately, and to help ensure we do not infringe third-party intellectual property rights during the course of business and/or operation.

These policies and controls support our management of intellectual property risk, and operate to help ensure that intellectual property risk is controlled consistently and effectively in line with our risk appetite.

Data Privacy Da y

In January 2022, we hosted an internal global data privacy event for our colleagues to mark International Data Privacy Day. The event, which was broadcast online, was hosted by our Global Head of Data Privacy Legal and the Global Data Risk Steward. The President and CEO of the International Association of Privacy Professionals was a guest speaker at the event.

Key themes included an exploration of developments in US state and federal data privacy legislation and regulations, developments in the implementation and embedding of existing data privacy laws, key challenges to organisations such as cross-border data transfers and data localisation requirements, and the evolving enforcement environment within which we operate.

The ethical use of data and AI

Artificial intelligence and other emerging technologies give us the ability to process and analyse data at a depth and breadth not previously possible. While these technologies offer significant potential benefits for our customers, they also pose potential ethical risks for the financial services industry and society as a whole. We have developed a set of principles to help us consider and address the ethical issues that could arise. HSBC's Principles for the Ethical Use of Data and Artificial Intelligence are available at www.hsbc.com/who-we-are/esg-and-responsible-business/our-conduct.

95	HSBC Holdings plc Annual Report and Accounts 2022

Cybersecurity

The threat of cyber-attacks remains a concern for our organisation, as it does across the financial sector. As cyber-attacks continue to evolve, failure to protect our operations may result in disruption for customers, manipulation of data or financial loss. This could have a negative impact on our customers and our reputation.

We continue to monitor ongoing geopolitical events and changes to the cyber threat landscape, and take necessary proactive measures with the aim to reduce any impact to our customers.

Prevent, detect and mitigate

We invest in business and technical controls to help prevent, detect and mitigate cyber threats. We apply a 'defence in depth' approach to cyber controls, recognising the complexity of our environment. Our ability to detect and respond to attacks through round-the-clock security operations centre capabilities helps to reduce the impact of attacks.

We continually evaluate threat levels for the most prevalent attack types and their potential outcomes. We have a cyber intelligence and threat analysis capability, which proactively collects and analyses external cyber information. We input into the broader cyber intelligence community through technical expertise in investigations and contributions to the cyber-sharing ecosystem in the financial services industry, alongside government agencies around the world.

In 2022, we further strengthened our cyber defences and enhanced our cybersecurity capabilities to help reduce the likelihood and impact of unauthorised access, security vulnerabilities being exploited, data leakage, third-party security exposure and advanced malware. These defences build upon a proactive data analytical approach to help identify advanced targeted threats.

Policy and governance

We have a comprehensive range of cybersecurity policies and systems designed to help ensure that the organisation is well managed, with oversight and control.

We operate a three lines of defence model, aligned to the operational risk management framework, to help ensure oversight and challenge of our cybersecurity capabilities and priorities. In the first line of defence, we have risk owners within global businesses and functions who are accountable for identifying and managing the cyber risk. They work with control owners to apply the appropriate risk treatment in line with our risk appetite. Our controls are executed in line with policies produced by our Resilience Risk teams, and are reviewed and challenged by the second line of defence. They are overseen by the Global Internal Audit function, the third line of defence.

We regularly report and review cyber risk and control effectiveness at relevant governance forums, including to the Board and across global businesses, functions and regions. In addition, we work with our third parties to help reduce the threat of cyber-attacks impacting our business processes. We have an assessment capability to review third parties' compliance with our information security policies and standards.

Cyber training and awareness

We understand the important role our people play in protecting against cybersecurity threats. Our mission is to equip every colleague with the appropriate tools and behaviours they need to keep our organisation and customers' data safe. We provide cybersecurity training and awareness to all our people, ranging from our top executives to IT developers to front-line relationship managers around the world.

Over 92% of our IT developers hold at least one of our enhanced security certifications to help ensure we build secure systems and products.

We host an annual cyber awareness month for all colleagues, covering topics such as online safety at home, social media safety, safe hybrid working and cyber incidents and response. Our dedicated cybersecurity training and awareness team provides regular programmes to our colleagues and customers. We provide a wide range of education and guidance to both customers and our colleagues about how to spot and prevent online fraud.

Over 97%

Employees completed mandatory cybersecurity training on time.

Over 92%

IT developers who hold at least one of our internal secure developer certifications.

Over 140

Cybersecurity education events held globally.

Over 97%

Survey respondents to cybersecurity education events who said they have a better understanding of cybersecurity following these events.

Educating customers online

Our Fraud and Cyber Awareness app, which launched in the UK in May 2021, has been enhanced and extended to eight markets in the Middle East and North Africa as a pilot to improve the financial education of our customers. The app is available free of charge for both personal and business customers, and is designed to keep customers and non-customers up to date with the latest trends concerning fraud, scams and cyber-attacks. It enables users to subscribe to real-time notifications about emerging fraud and cybercrime trends. Since May 2021, the app has been downloaded approximately 28,000 times and has a 4.8 rating on Google Play and iOS app store. We plan to roll out the app to further markets in 2023.

96	HSBC Holdings plc Annual Report and Accounts 2022

 

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