HSBC will no longer finance new oil and gas fields as part of its effort to drive down global greenhouse gas emissions.
The move sends a strong signal to the fossil fuel companies.
The bank received advice from international energy experts.
It comes after HSBC was criticized for funding oil and gas projects.
"HSBC's announcement sends a strong signal to fossil fuel giants and governments that banks' appetite for financing new oil and gas fields is diminishing."
This move sets a new minimum level of ambition for the sector, according to the charity.
HSBC pledged in 2020 to be "net zero" and invest up to $1 trillion in clean energy.
The bank came under fire earlier this year when it was revealed it had invested billions of dollars into new oil and gas.
The bank said that it followed consultation with leading scientific and international bodies who had estimated that current oil and gas fields would meet any demand in 2050 under a "net-zero" scenario.
195 countries agreed in the Paris Agreement to try to keep the temperature from rising more than 1.5C.
Net zero must be achieved by the year 2050 according to experts.
In October, Lloyds bank announced a similar decision.
"It's another nail in the coffin for fossil fuel expansion, and a huge signal to other UK banks that the game is up on new oil and gas," said Tony Burdon, chief executive at Climate finance campaign Make My Money Matter.
It's not clear if this is the start of a trend across the sector, but it comes just months after the UK government announced a new round of licensing for oil and gas production in the North Sea.
Fossil fuels, especially natural gas, have a role to play in the transition, even though that role will diminish, according to HSBC.
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