HSBC Asset Management launches two sustainable fixed income ETFs
HSBC Asset Management (HSBC AM) has launched its first two funds as part of a planned wider range of sustainable fixed income ETFs.
The HSBC Bloomberg EUR Corporate Sustainable Bond UCITS ETF will launch on the London Stock Exchange (LSE) today and the HSBC Bloomberg USD Corporate Sustainable Bond UCITS ETF with further listings in Europe expected in the following weeks.
The funds have a carbon emission intensity reduction target of over 40 per cent and an ESG score improvement target of over 10 per cent (EUR) and 15 per cent (USD) relative to the parent index. Both funds meet Article 8 Sustainable Finance Disclosure Regulation (SFDR) classification.
Each fund tracks its respective Bloomberg Barclays MSCI Corporate SRI ESG-Weighted Index (USA & Europe) and seeks to provide consistent beta exposure to the high-quality and diversified corporate bond universe.
The indices’ methodology, designed in collaboration with Bloomberg, incorporate all three of Bloomberg’s existing ESG index approaches, alongside an additional carbon screen. An additional carbon intensity filter enables the screening process to not only remove issuers involved in controversial industries, and those with poor ESG practices, but to also tackle the most immediate of environmental issues by excluding the worst carbon emissions offenders. This ensures a slight overweight position on ESG leaders and an underweight position on ESG laggards.
Olga de Tapia, Global Head of ETF Sales, HSBC AM, says: “Demand for sustainable investment products has again grown exponentially this year. Facilitating our clients’ transition to more sustainable low-carbon investments is a clear strategic priority for us.
“Our new fixed income ETF range takes a step beyond many existing sustainable fixed Income ETF products offering investor a deeper shade of green in their investment portfolios.”
Erin Leonard, Head of Sustainability, HSBC AM, says: “Investors have a key part to play in the global transition to a net zero economy by allocating capital away from firms with poor ESG practices and pressuring issuers to improve transparency. We’re glad to be able to provide clients with the tools they need to build diverse portfolios with better ESG credentials. These fixed income ETFs are a complementary extension of our existing sustainable equity ETF fund range and an important part of the sustainability solution set for our clients.”
The funds’ screening process also involves a socially responsible investment filter (leading to the exclusion of issuers involved with weapons, tobacco, alcohol, thermal coal, nuclear energy, breaches of UN Global Compact (UNGC) principles, gambling, and adult entertainment). Additionally, the funds use a best-in-class ESG screen to remove companies with poor ESG scores relative to peers and little hope of improvement.
This fund will be rebalanced on a monthly basis, and at each monthly rebalance, currency and industry neutrality constraints are applied at index level to minimise tracking error versus the parent index. As ESG practices evolve and issuers disclose more data around their ESG thinking, the screening methodology will adapt accordingly.