HSBC Global Asset Management today announced the launch of a new generation of sustainable ETFs, combining sustainable investing with a cost-efficient exposure to developed and emerging equity markets at global, regional and country levels.
Three of the new ETFs, the HSBC Europe Sustainable Equity UCITS ETF, the HSBC Japan Sustainable Equity UCITS ETF and the HSBC USA Sustainable Equity UCITS ETF, were listed on the London Stock Exchange (LSE) this morning.
Three additional launches, focused on the developed world, Emerging Markets and Asia Pacific ex Japan, are expected in the coming weeks. Further listings are also planned across key markets in Europe, HSBC announced.
Investors' desire to initiate change through sustainable investing continues to grow and long-term equity returns are increasingly driven by companies that effectively implement strong environmental, social and governance practices."
The ETFs will track the newly created FTSE Russell ESG Low Carbon Select Indices which were developed and customised in collaboration with FTSE Russell, a leading provider of index solutions. As well as aiming to achieve a 20% ESG score uplift, the indices go one step beyond the current market offering by targeting two areas of carbon exposure - a 50% carbon emissions reduction and a 50% fossil fuel reserves reduction, relative to the parent index.
The three-pronged approach also takes into consideration country neutrality and sector neutrality, within set bands, relative to the parent market cap indices, and incorporates a custom exclusion list based on UN Global Compact Principles and other sustainability factors.
The ETFs aim to replicate the performance of the underlying indices while minimising the tracking difference between the fund and the index.
Xavier Desmadryl, global head of ESG Research at HSBC Global Asset Management, said: "Investors' desire to initiate change through sustainable investing continues to grow and long-term equity returns are increasingly driven by companies that effectively implement strong environmental, social and governance practices.
"We seek to encourage all companies held in our portfolios to establish and maintain high levels of transparency, particularly in their management of ESG issues and risks. Engagement with these companies is an important element in both our ESG integration and our stewardship oversight. These foundations are the driving force behind our new sustainable equity ETFs, which will provide investors with a core sustainable building block for their portfolios."
Olga De Tapia, global head of ETF sales at HSBC Global Asset Management, added: "Our new ETF range takes a step beyond traditional sustainable ETF products by tracking indices, developed by FTSE Russell, that follow an innovative three-tilt approach. This approach allows us to capture the benefits of positive inclusion and access companies that are transitioning towards a lower carbon economy.
"Due to the evolution of the energy industry, the indices aim to capture stocks with lower fossil fuel reserves intensity, including alternative energy companies. The indices' target of a 50% reduction on fossil fuels reserves allows them to include those companies that are at the forefront of this transition."
Stephane DeGroote, Managing Director, Head of ETFs & Derivatives business EMEA, FTSE Russell, said: "FTSE Russell worked closely with HSBC Global Asset Management to develop bespoke indexes that integrate ESG ratings, carbon emissions and reserves considerations, paving the way for a new generation of ETFs."