Our vision is to empower our clients to make a positive change in the world through wealth value creation.
Invested capital can be used to tackle some of the greatest challenges threatening our world today. That includes Environmental, Social and Corporate Governance (ESG) factors – such as climate change – which can have a significant impact on people, businesses and communities around the world.
We’re committed to helping accelerate the transition to a low-carbon global economy. As a leading wealth manager, we have the capital, resources and solutions to make a difference globally.
Through our sustainable investing solutions and expertise, we help clients understand the long-term environmental and societal implications of their investments, so they can achieve their financial goals without compromising on their values.
| Categories | ESG Enhanced | Thematic | Impact |
|---|---|---|---|
| Description | A spectrum of approaches, investing in companies based on relative ESG performance or momentum | Focus on themes and sectors dedicated to solving sustainability challenges and related growth trends | Focus on a direct, positive and measurable impact on society and/or the environment, alongside financial returns |
Investment approaches |
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|
Examples include:
|
| Categories | Description |
|---|---|
| ESG Enhanced | A spectrum of approaches, investing in companies based on relative ESG performance or momentum |
| Thematic | Focus on themes and sectors dedicated to solving sustainability challenges and related growth trends |
| Impact | Focus on a direct, positive and measurable impact on society and/or the environment, alongside financial returns |
| Categories |
Investment approaches |
| ESG Enhanced |
|
| Thematic |
|
| Impact |
Examples include:
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These strategies may also be represented in sustainable investment products:
ESG Integration
Systematic inclusion of ESG factors in financial analysis, and mitigating ESG risks.
Negative screening
Exclusion of sectors, companies or practices based on specific criteria.
Corporate engagement
Exercise shareholders' rights to influence corporate behaviour.
Why we consider ESG Factors
1. To mitigate risk
ESG issues can be financially material and may have a negative impact on share prices. For example, climate change presents the risk of damaged assets, changing regulations and more frequent catastrophic events.
| ESG Risk Event | Year | 1 Year performance impact on affected company's share price (%) |
|---|---|---|
| Energy accounting scandal | 2001 | (99.6) |
| Telecommunications accounting scandal | 2002 | (98.6) |
| Upper Big Branch Mine explosion | 2010 | (52.7) |
| Deepwater Horizon oil spill | 2010 | (28.2) |
| Automobile airbag recall | 2014 | (53.5) |
| Pharmaceutical accounting scandal | 2015 | (91.5) |
| Automobile emissions scandal | 2015 | (26.4) |
| Average loss to shareholders after one year | (64.4) |
| ESG Risk Event | Energy accounting scandal |
|---|---|
| Year | 2001 |
| 1 Year performance impact on affected company's share price (%) | (99.6) |
| ESG Risk Event | Telecommunications accounting scandal |
| Year | 2002 |
| 1 Year performance impact on affected company's share price (%) | (98.6) |
| ESG Risk Event | Upper Big Branch Mine explosion |
| Year | 2010 |
| 1 Year performance impact on affected company's share price (%) | (52.7) |
| ESG Risk Event | Deepwater Horizon oil spill |
| Year | 2010 |
| 1 Year performance impact on affected company's share price (%) | (28.2) |
| ESG Risk Event | Automobile airbag recall |
| Year | 2014 |
| 1 Year performance impact on affected company's share price (%) | (53.5) |
| ESG Risk Event | Pharmaceutical accounting scandal |
| Year | 2015 |
| 1 Year performance impact on affected company's share price (%) | (91.5) |
| ESG Risk Event | Automobile emissions scandal |
| Year | 2015 |
| 1 Year performance impact on affected company's share price (%) | (26.4) |
| ESG Risk Event | Average loss to shareholders after one year |
| Year | |
| 1 Year performance impact on affected company's share price (%) | (64.4) |
Source: Bloomberg, Morgan Stanley. Past performance is not an indicator of future performance. For illustrative purpose only.
2. To deliver long-term capital growth
Companies that manage their ESG risks and create value for stakeholders – such as employees, customers, suppliers and wider society – are more likely to survive through cycles and thrive in the long term.
3. Unlock opportunities
Transition to a low-carbon economy could lead to investment opportunities. Countries representing more than 65% of global carbon dioxide emissions and more than 70% of the global economy, have made commitments to carbon neutrality. Investors can look to various sectors and companies that are set to benefit from net-zero policies around the world.
Source: UN News, 2 December 2020.
Sustainable investments cover a wide range of topics
Environmental
How companies manage their impact on the environment:
- greenhouse gas emissions
- resource depletion
- water usage
- waste and pollution
Social
How companies manage relationships with employees, clients and communities:
- regard for human rights
- development and treatment of staff
- oversight of the supply chain
- health and safety
Governance
How companies are governed or managed:
- executive pay
- business ethics and culture
- diversity and structure of board
- regard for shareholder rights
ESG going mainstream
According to the Global Sustainable Investment Trends Review, over USD40trn of total assets was deployed into ESG investments in 2020, a 15% compound annual growth rate from 2018.
Source: Global Sustainable Investment Trends Review (2016 & 2018), Opimas (2020 data)
Debunking sustainable investing myths
It hurts financial returns
ESG factors don’t hurt investment performance and an ESG-led investment approach may in fact help portfolios benefit from the transition to a more sustainable economy.
In 2020, investment performance suggests that ESG is a source of outperformance.
Source: Refinitiv DataStream, as of 31 Dec 2020.
It’s only relevant to equity portfolios
ESG works best as part of a multi-asset approach. This is still the soundest way to manage volatility while investing in line with your values, and without sacrificing optimal investment practice.
Selection in each asset class can then be skewed towards companies and governments with superior ESG practices, and explicit allocations made to relevant themes like green bonds or renewables. Consideration may also be given to regions and economies where strong ESG practices prevail.
Source: “Investing for a sustainable future: Is there a cost attached?”, HSBC Jade Perspectives, March 2021.
It’s expensive and only for institutional investors
Although institutional investors used to account for the majority of sustainable investment assets, retail investment has been growing more quickly. There is a growing number of sustainable investment funds, and many carry small minimum investment requirements.
According to Morningstar’s Global Sustainable Fund Flow Q4 2020 Report, assets in sustainable funds hit a record high of US$1,652 billion as of the end of December 2020. Product development in the fourth quarter hit an all-time high, with 196 new offerings, bringing the total number of sustainable funds globally to 4,153 at the end of December 2020.
Our sustainable approach to wealth
Sustainability at HSBC
HSBC’s ambition is to be the leading bank for the transition to net zero through a 3-part plan:
- become a net zero bank
- support customers to thrive through the transition
- unlock the next generation of climate solutions
Central to this ambition is our goal of reducing financed emissions to net zero by 2050 or sooner, in line with the Paris Agreement. In doing so, HSBC Group aims to facilitate between USD750 billion and USD1 trillion of finance and investment by 2030 to support our clients.
For more information, please review our global climate strategy.
Our awards and recognition
- World’s Best Bank for Sustainable Finance (Euromoney, 2019, 2020)
- Asia’s Best Bank for Sustainable Finance (Euromoney, 2019, 2020)
- Middle East’s Best Bank for Sustainable Finance (Euromoney, 2019, 2020)
- Western Europe’s Best Bank for Sustainable Finance (Euromoney, 2020)
- Five ‘Lead Manager of the Year’ awards across social, sustainability and green bond categories (Environmental Finance, 2020)
- Best CSR/ESG/D&I Thought Leadership Campaign (Treasury Management International, 2019)
- Number one for Climate Change research team for six consecutive years (Extel, 2019)
- Most Impressive Investment Bank for Asia Pacific Green/SRI Capital Markets (GlobalCapital, 2019)
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Important Information
There “Sustainable investments” include investment approaches or instruments which consider environmental, social, governance and/or other sustainability factors (collectively, “sustainability”) to varying degrees. Certain instruments we include within this category may be in the process of changing to deliver sustainability outcomes.
There is no guarantee that sustainable investments will produce returns similar to those which don’t consider these factors. Sustainable investments may diverge from traditional market benchmarks.
In addition, there is no standard definition of, or measurement criteria for sustainable investments, or the impact of sustainable investments (“sustainability impact”). Sustainable investment and sustainability impact measurement criteria are (a) highly subjective and (b) may vary significantly across and within sectors.
HSBC may rely on measurement criteria devised and/or reported by third party providers or issuers. HSBC does not always conduct its own specific due diligence in relation to measurement criteria. There is no guarantee: (a) that the nature of the sustainability impact or measurement criteria of an investment will be aligned with any particular investor’s sustainability goals; or (b) that the stated level or target level of sustainability impact will be achieved.
Sustainable investing is an evolving area and new regulations may come into effect which may affect how an investment is categorised or labelled. An investment which is considered to fulfil sustainable criteria today may not meet those criteria at some point in the future.
The HSBC Group has a classification system for investment products, defined as ESG Enhanced, Thematic and Impact. The definitions and minimum requirements for each category can be found here. These definitions were not designed to be aligned to any regulatory definition of ‘sustainable investment’. Please consult your Relationship Manager or Investment Counsellor if you wish to discuss sustainable investing.