Spotlight on ESG: Making sustainable investments

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Spotlight on ESG: Sustainable investing

What is ESG?

Environmental, Social and Governance, or ESG, is a set of criteria that can be applied to how a company operates. When we talk about ESG investing, we're referring to the use of these criteria as factors impacting investment decisions and evaluating potential companies to add to your financial portfolio.

Sustainability is the cornerstone of ESG investing. The global economy is putting a spotlight on responsible investment, an approach to developing sustainable investment solutions that are focused on longer term wins shaped by ESG principles. HSBC has spent the last over 150 years serving the needs of a constantly evolving globalised world. We are committed to the ultimate cause of sustainability because we're dedicated to the communities and societies in which we operate, and to that cause, we champion building a better tomorrow for future generations to come.

Today, our sustainability strategy focuses on 3 main areas:

Sustainable finance
Sustainable supply chains
Employability and financial capability

Ways to invest

Unit trusts

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Why does ESG matter?

The financial world is getting increasingly plugged in to ESG development and as a result, we're seeing more and more companies incorporating ESG principles into their operations, instead of purely focusing on profitability. On an individual level, integrating ESG into your investment decisions creates a more resilient portfolio that will stand the tides of time. When individual investors, corporates and societies place ESG principles at the forefront, it's a win on all fronts that aims at building a better world and making sure the resources we have today will still be around tomorrow, all while unearthing great opportunities in the process.

We've been seeing tremendous growth in responsible investment, a clear sign that investors and companies are seeing the value of striving for social and environmental responsibility, in a bid to build a more sustainable future. The numbers speak for themselves.

This infographic shows the exponential growth in socially responsible investments from 2014 to 2016 across 4 geographical regions. Australia and New Zealand saw an increase from USD148 billion to USD516 billion, Asia experienced an increase from USD52 billion to USD526 billion, Europe saw an increase from USD10.8 trillion to USD12 trillion, and the US and Canada experienced an increase from USD7.3 trillion to USD9.8 trillion. Altogether, the 4 regions recorded a jump from USD18.3 trillion in 2014 to USD22.9 trillion in 2016.

Source: HSBC Global Asset Management, "Global Sustainable Investment Review", 2016

Examples of common ESG issues

Environmental

Climate change
Air and water pollution
Waste management
Energy efficiency
Water scarcity

Social

Human rights
Consumer privacy
Gender equality
Data security
Health and safety

Women working together in a coworking office.

Governance

Board structures
Company ownership
Financial reporting
Business ethics and culture
Executive remuneration

Reasons to consider ESG factors when investing

Mitigate risks: ESG issues can affect a company's value and financial performance, as well as influence share prices¹
Enhance potential returns: Companies with strong ESG metrics are more likely to outperform others²
Provide greater opportunities: Companies that are robust at adapting to changing consumer needs and regulatory requirements are more likely to benefit from competitive advantages in the longer term³

Ways to invest

Unit trusts⁴
Fund Name	Fund Code	Currency	Distribution	Risk level	Details
HSBC Global Investment Funds - Global Lower Carbon Equity	HCEAU	USD	Accumulation	4	Click here
HSBC Global Investment Funds - Global Lower Carbon Equity	HCEAS	SGD	Accumulation	4	Click here
HSBC Global Investment Funds - Global Lower Carbon Bond	HCBAU	USD	Accumulation	2	Click here
HSBC Global Investment Funds - Global Lower Carbon Bond	HCBAS	SGD	Accumulation	2	Click here
HSBC Global Investment Funds - Global Lower Carbon Bond	HCBSC	SGD	Cash Dividend	2	Click here
HSBC Global Investment Funds - Global Lower Carbon Bond	HCBSR	SGD	Unit Dividend	2	Click here
HSBC Global Investment Funds - Global Lower Carbon Bond	HCBUC	USD	Cash Dividend	2	Click here
HSBC Global Investment Funds - Global Lower Carbon Bond	HCBDR	USD	Unit Dividend	2	Click here
Schroder ISF Global Climate Change Equity	SGCCU	USD	Accumulation	4	Click here
Schroder ISF Global Climate Change Equity	SGCCS	SGD	Accumulation	4	Click here
Schroder ISF Sustainable Multi Asset Income	SSMEA	EUR	Accumulation	2	Click here
Schroder ISF Sustainable Multi Asset Income	SSMEC	EUR	Cash Dividend	2	Click here
Schroder ISF Sustainable Multi Asset Income	SSMSA	SGD	Accumulation	2	Click here
Schroder ISF Sustainable Multi Asset Income	SSMSC	SGD	Cash Dividend	2	Click here
Schroder ISF Sustainable Multi Asset Income	SSMUA	USD	Accumulation	3	Click here
Schroder ISF Sustainable Multi Asset Income	SSMUC	USD	Cash Dividend	3	Click here

Unit trusts⁴
Fund Name	HSBC Global Investment Funds - Global Lower Carbon Equity
Fund Code	HCEAU
Currency	USD
Distribution	Accumulation
Risk level	4
Details	Click here

Fund Name	HSBC Global Investment Funds - Global Lower Carbon Equity
Fund Code	HCEAS
Currency	SGD
Distribution	Accumulation
Risk level	4
Details	Click here

Fund Name	HSBC Global Investment Funds - Global Lower Carbon Bond
Fund Code	HCBAU
Currency	USD
Distribution	Accumulation
Risk level	2
Details	Click here

Fund Name	HSBC Global Investment Funds - Global Lower Carbon Bond
Fund Code	HCBAS
Currency	SGD
Distribution	Accumulation
Risk level	2
Details	Click here

Fund Name	HSBC Global Investment Funds - Global Lower Carbon Bond
Fund Code	HCBSC
Currency	SGD
Distribution	Cash Dividend
Risk level	2
Details	Click here

Fund Name	HSBC Global Investment Funds - Global Lower Carbon Bond
Fund Code	HCBSR
Currency	SGD
Distribution	Unit Dividend
Risk level	2
Details	Click here

Fund Name	HSBC Global Investment Funds - Global Lower Carbon Bond
Fund Code	HCBUC
Currency	USD
Distribution	Cash Dividend
Risk level	2
Details	Click here

Fund Name	HSBC Global Investment Funds - Global Lower Carbon Bond
Fund Code	HCBDR
Currency	USD
Distribution	Unit Dividend
Risk level	2
Details	Click here

Fund Name	Schroder ISF Global Climate Change Equity
Fund Code	SGCCU
Currency	USD
Distribution	Accumulation
Risk level	4
Details	Click here

Fund Name	Schroder ISF Global Climate Change Equity
Fund Code	SGCCS
Currency	SGD
Distribution	Accumulation
Risk level	4
Details	Click here

Fund Name	Schroder ISF Sustainable Multi Asset Income
Fund Code	SSMEA
Currency	EUR
Distribution	Accumulation
Risk level	2
Details	Click here

Fund Name	Schroder ISF Sustainable Multi Asset Income
Fund Code	SSMEC
Currency	EUR
Distribution	Cash Dividend
Risk level	2
Details	Click here

Fund Name	Schroder ISF Sustainable Multi Asset Income
Fund Code	SSMSA
Currency	SGD
Distribution	Accumulation
Risk level	2
Details	Click here

Fund Name	Schroder ISF Sustainable Multi Asset Income
Fund Code	SSMSC
Currency	SGD
Distribution	Cash Dividend
Risk level	2
Details	Click here

Fund Name	Schroder ISF Sustainable Multi Asset Income
Fund Code	SSMUA
Currency	USD
Distribution	Accumulation
Risk level	3
Details	Click here

Fund Name	Schroder ISF Sustainable Multi Asset Income
Fund Code	SSMUC
Currency	USD
Distribution	Cash Dividend
Risk level	3
Details	Click here

Structured products

Structured products⁵ are investment products where returns are linked to an underlying asset with pre-defined features such as tenor, currency and payout calculation.

The underlying assets of structured products can include equities, interest rates, commodities, mutual funds and foreign currencies, among others. These underlying assets can be linked to ESG-related strategies.

For more information on the availability of these structures, please contact your Relationship Manager.

Green bonds

A green bond is a bond⁶ that uses its proceeds solely for the financing or re-financing of green projects. The issuer must also declare the bond to be green and commit to a level of transparency on how the bond's proceeds are used.

A green bond should be put together in line with the Green Bond Principles (GBPs), a set of voluntary guidelines created by the International Capital Markets Association (ICMA). According to these GBPs, a company does not have to be green to issue a green bond, but all of the bond proceeds have to go towards green or environmental projects.

For more information on our range of green bonds, please contact your Relationship Manager.

FAQs

The criteria for measuring ESG impact is quite subjective, and may vary significantly across and even within sectors.

At HSBC, sustainable investing refers to the objective of generating long-term financial returns while contributing positively to the environment and society around us. We consider the following examples to be sustainable investment strategies:

Inclusion: Strategies that enhance portfolio exposure to better ESG performers
Thematic: Strategies that provide exposure to environmental or social trends
Impact: Strategies that have a clear intent to deliver a measurable impact on society and/or the environment

Sustainable investing focuses on long-term value creation and preservation, so it aligns with investors' long-term investment goals. By integrating ESG factors into investment decisions, we can help you attain a more resilient portfolio over the longer term.

No, that's not true. HSBC Global Premier conducted customer research on sustainable investments across 7 core markets and found that over 80% of total respondents indicated an interest in sustainable investing.

This graph shows the percentage of HSBC Premier customers surveyed across 7 key markets who expressed interest in sustainable investing, ranging from 68% in the US to 95% in China.

Source: HSBC Premier, January 2019

There is evidence that ESG issues can be financially material. Instead of hurting your financial returns, factoring ESG principles into your investments can help mitigate your risk exposure and enhance the resilience of your portfolio. Studies also show that companies with a strong ESG focus have strong valuation re-rating potential⁷.

While it is difficult to time and predict market movements as a result of ESG factors or events, it's important to evaluate your own risk tolerance and any additional risks you might be taking on for quick gains, as well as to understand that all investments carry varying degrees of risk. Additionally, integrating sustainable considerations into your investment decisions does not mean that other fundamental analysis and valuation techniques should be ignored. Ultimately, if the investment doesn't meet your financial objectives, then it isn't a suitable investment for you to make.

Sustainability at HSBC

We're invested in the communities and societies we operate in, and committed to serving the needs of a changing world. This is why we recognise that economic development has to be sustainable so we can start building a better tomorrow today.

Our commitment:

Provide USD100bil of sustainable financing and investment by 2025
Source 100% of our electricity from renewable sources by 2030, with an interim target of 90% by 2025
Establish a Centre for Sustainable Finance to provide thought leadership on climate change and the role of the financial services sector
Reduce our exposure to thermal coal and actively manage the transition path for other high-carbon sectors
Adopt the recommendations of the Task Force on Climate-related Financial Disclosures to improve transparency

Awards and recognition:

'Best Bank for Sustainable Finance in Asia, Middle East and Western Europe' (Euromoney, Jul 2020)
'World's Best Bank for Sustainable Finance' (Euromoney, Jul 2019)
'Asia's Best Bank for Sustainable Finance' (Euromoney, Jul 2018)
Three 'Lead Manager of the Year' awards across social, sustainable and green bond categories (Environmental Finance, Apr 2019)
Number one for 'Integrated Provider of Climate Change' for fifth consecutive year (Extel, Jun 2018)
'Most Impressive Financial Institution Green/SRI Bond Issuer' (GlobalCapital, Sep 2018)

We publish regular updated information on our ESG performance. You can find more information about how we do business and how we approach ESG issues and events by visiting https://www.hsbc.com/investors/esg-investors.

More resources

Wind turbine from aerial view; image used for HSBC Building a sustainable future.

Sustainability, the HSBC way

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See how we're doing our part to build a sustainable future.

Hand holding plant; image used for HSBC Personal Instalment Loan.

Your quick guide to sustainable investing

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Learn more about responsible investment and the opportunities it can create.

Family hiking in the mountain; image used for HSBC Wealth ESG Insights.

Pick up our latest ESG insights

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Get our take on the world of ESG and sustainable investing.

¹ Source: HSBC, Sustainable Investments Introduction Guide, 2020

² Source: Eccles G.R., Ioannou I. Serafeim G., "The impact of a Corporate Culture of Sustainability on Corporate Behaviour and Performance", Harvard Business School, November 2011

³ Source: International Institute for Sustainable Development, 24 September 2019

⁴ Please note that HSBC relies on the environmental, social and governance impact measurement criteria reported by third party fund managers and does not conduct its own due diligence in relation to such criteria.

⁵ Structured products are available only to Accredited Investors. Other eligibility criteria apply, please visit https://www.hsbc.com.sg/wealth/investments/products/structured-products/ for more details.

⁶ Bonds are available only to Accredited Investors. Other eligibility criteria apply, please visit https://www.hsbc.com.sg/wealth/investments/products/bonds/ for more details.

⁷ Source: HSBC Global Research, "ESG Playbook", October 2018

Disclaimer

Please note that there is no guarantee that:

(a) the nature of the ESG impact of an investment will be aligned with any particular investor's ESG impact goals;

(b) the stated level or target level of ESG impact of an investment will be achieved; or

(c) an investment approach which considers ESG factors will produce returns similar to those which don't consider these factors. Investments which consider ESG factors may diverge from traditional market benchmarks.

This document is for information only and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. The mention of any investment product or class of investment products ("product") should not be construed as representing a recommendation to buy or sell that product, nor does it represent a forecast on future performance of the product. The information contained on this web site is intended for Singapore residents only and should not be construed as a distribution, an offer to sell or a solicitation to buy any product in any jurisdiction where such activities would be unlawful under the laws of such jurisdiction, in particular the United States of America and Canada. The specific investment objectives, personal situation and particular needs of any person have not been taken in consideration. You should therefore not rely on it as investment advice. Any transaction that you decide to make will be one of your own choice and at your own risk.

Spotlight on ESG: Sustainable investing

What is ESG?

Ways to invest

Why does ESG matter?

Examples of common ESG issues

Environmental

Social

Governance

Reasons to consider ESG factors when investing

Ways to invest

Structured products

Green bonds

FAQs

What do sustainable investing or sustainable-related strategies mean?

How can an investor meet their financial goals through sustainable and responsible investing?

Is it true that investors don't care about sustainability?

Will investing sustainably hurt my financial returns?

Is there a trade-off between short-term gains and company stocks that adopt sustainable practices?

Sustainability at HSBC

More resources

Sustainability, the HSBC way

Your quick guide to sustainable investing

Pick up our latest ESG insights

Disclaimer