Fund Management

Asset Manager Launches Two Funds Targeting Returns On Low-Carbon Investments

Josh O'Neill, Assistant Editor, 4 October 2017

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The launch comes at a time when the regulation of emissions is driving business change across the world.

HSBC's global asset management unit has launched two new funds that aim to help investors shrink their carbon footprint, as momentum around climate-related investments builds. 

The HSBC GIF Global Lower Carbon Equity Fund and the HSBC GIF Global Lower Carbon Bond Fund “aim to address climate-related investment risk” by drawing on data to achieve a lower carbon portfolio than their respective reference benchmarks, HSBC said. 

“Climate change is a very real investment issue; creating risks and opportunities as companies are impacted directly or as a result of regulatory changes as we transition to a lower carbon economy,” said Melissa McDonald, global head of product, equity and responsible investment at HSBC Global Asset Management. “Taking a proactive approach can help investors to mitigate the risks associated with climate change, estimated at a loss of return of 0.82 per cent per year for developed equities. We have seen increasing demand from investors for products that take a climate risk-based approach as part of their core holdings, and our two new funds do just that.”

The launch comes at a time when the regulation of emissions is driving business change across the world. Failure to comply with such rules can result in hefty fines being levied and potential trading bans, which in turn would eat into shareholder returns. 

According to HSBC Global Asset Management, 65 per cent of institutional investors are looking to increase low-carbon investments over the next year. 

Its GIF Global Lower Carbon Equity Fund will seek a lower portfolio carbon footprint than its reference benchmark, the MSCI World Net USD Index, by reducing exposure to equities with higher greenhouse gas emissions. It will primarily invest in developed markets equities. 

Similarly, the GIF Global Lower Carbon Bond Fund targets a smaller portfolio carbon footprint than the Bloomberg Barclays Global Aggregate Corporates Diversified Index Hedged USD, its reference benchmark, by analysing the impact individual issuers and sectors have on greenhouse gas emissions. It will typically invest in investment grade corporate bonds using the same investment strategy as the firm's global fixed income products.

“The implications of climate change and transitioning to a lower-carbon economy are core investment considerations – today and for the coming decades,” McDonald continued. “Our carbon-conscious and climate-aware approach to investing is designed to build more climate-resilient portfolios for our clients and to contribute towards financing the transition to a lower-carbon economy.”

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