HSBC Asset Management (HSBC AM) has launched the HSBC World ESG Biodiversity Screened Equity UCITS ETF, which the firm describes as the first of its kind.
The fund aims to provide both wholesale and institutional investors with a tool to build biodiversity considerations into their portfolios by investing in companies that have stronger biodiversity credentials. The fund meets Article 8 Sustainable Finance Disclosure Regulation (SFDR) classification.
The fund tracks the Euronext ESG Biodiversity Screened Index series which were jointly developed by HSBC, Euronext and Iceberg Data Lab (IDL). These were the first investable biodiversity screened benchmark indices based on a broad range of equities, the firm says. The parent index is the Euronext World Index.
The fund applies three exclusionary biodiversity filters:
1. Socially Responsible Investment (SRI) filter built to include biodiversity considerations e.g. pesticides, hunting, whaling etc.
2. Negative ESG screening removing the worst 25 per cent of constituents using Sustainalytics risk performers methodology
3. IDL Corporate Biodiversity Footprint uplift of around 35 per cent versus the parent index
IDL’s Corporate Biodiversity Footprint (CBF) methodology uses Mean Species Abundance for its biodiversity score and assesses four of the most material pressures on biodiversity – climate change, land use, air pollution and water pollution.
Following the filters, the ETF will consist of the top 500 companies that perform the best in terms of the Corporate Biodiversity Footprint and Sustainalytics ESG risk score, whilst not participating in any of the exclusionary actions applied by the enhanced socially responsible investing (SRI) filter.
Comprehensive biodiversity data does not yet exist in full, meaning there is currently a need for multiple screens which capture biodiversity risks, the firm says. As data availability and quality improves the screening methodology will continually be enhanced by HSBC AM’s Responsible Investment team.
Olga de Tapia, Global Head of ETF and Indexing Sales, HSBC AM says: “This ETF is the newest in our suite of sustainable building blocks we have been innovating for investors, to help them create portfolios that address material environmental issues such as biodiversity and climate change.
“We have a huge part to play in the protection and preservation of biodiversity which can be achieved through ‘biodiversity aware’ investment processes and this ETF is hopefully a step in combatting the biodiversity crisis.”
Patrick Kondarjian, Global Head of ESG Sales, Markets & Securities Services, HSBC, says: “We’re pleased to have helped HSBC AM create the world’s first ETF that tracks the Euronext ESG Biodiversity Screened World USD Index. The index is part of the first range of investable biodiversity screened Equity benchmark indices, allowing investors to take into account the impact of companies on nature in addition to traditional ESG risk metrics.”