HSBC 2012 Annual Report Download - page 282

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Appendix – Risk policies and practices > Pension risk / Sustainability risk // Capital
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The trustee assumes the overall responsibility for the scheme but a management committee and a number of sub-
committees have also been established. These committees have been established to broaden the governance and
manage the concomitant issues. The finance and investment sub-committee manages the various issues in relation to
both assets and liabilities of the scheme.
Pension plans in North America
The HSBC North America (US) Retirement Income Plan covers all employees of HSBC Bank USA, HSBC Finance
and other HSBC entities in the US who have reached the age of 21 and met the one year of service participation
requirement. The Retirement Income Plan is a funded defined benefit plan which provides final average pay benefits
to legacy participants and cash balance benefits to all other participants. Prior to 1 January 2013 all new employees
participate in the cash balance section of the plan. In November 2009, the Board of Directors of HSBC North
America Holdings, Inc. (‘HNAH’) approved actions to cease all future benefit accruals for legacy participants under
the final average pay formula components of the HSBC North America Retirement Income Plan with effect from 1
January 2011.
The Plan is governed by the Employee Retirement Security Act of 1974 (‘ERISA’), ERISA regulations serve as
guidance for the management of plan assets. In this regard, an Investment Committee (the ‘Committee’) for the Plan
has been established and its members have been appointed by the Chief Executive Officer as authorized by the Board
of Directors of HSBC North America. The Committee is responsible for establishing the funding policy and
investment objectives supporting the Plan including allocating the assets of the Plan, monitoring the diversification of
the Plan’s investments and investment performance, assuring the Plan does not violate any provisions of ERISA and
the appointment, removal and monitoring of investment advisers and the trustee.
A key factor shaping the Committee’s attitude towards risk is the generally long-term nature of the underlying benefit
obligations. The asset allocation decision reflects this long-term horizon as well as the ability and willingness to
accept some short-term variability in the performance of the portfolio in exchange for the expectation of competitive
long-term investment results for its participants.
Sustainability risk
(Unaudited)
Sustainability risks arise from the provision of financial services to companies or projects which run counter to the
needs of sustainable development; in effect this risk arises when the environmental and social effects outweigh
economic benefits. Within Group Head Office, a separate function, Group Corporate Sustainability, is mandated to
manage these risks globally working through local offices as appropriate. Sustainability Risk Managers have regional
or national responsibilities for advising on and managing environmental and social risks.
Group Corporate Sustainability’s risk management responsibilities include:
• formulating sustainability risk policies. This includes oversight of our sustainability risk standards, management
of the Equator Principles for project finance lending, and sector-based sustainability policies covering those
sectors with high environmental or social impacts (forestry, freshwater infrastructure, chemicals, energy, mining
and metals, and defence-related lending); undertaking an independent review of transactions where sustainability
risks are assessed to be high, and supporting our operating companies to assess similar risks of a lower
magnitude;
• building and implementing systems-based processes to ensure consistent application of policies, reduce the costs
of sustainability risk reviews and capture management information to measure and report on the effect of our
lending and investment activities on sustainable development; and
• providing training and capacity building within our operating companies to ensure sustainability risks are
identified and mitigated consistently to either our own standards, international standards or local regulations,
whichever is higher.