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HSBC Asset Management launches new Shariah screened ESG ETFs

HSBC Asset Management (HSBC AM) has further expanded its ETF and indexing product suite with five new Islamic ESG ETFs.

The HSBC MSCI USA Islamic ESG UCITS ETF launched on the London Stock Exchange. The funds will be classified as Article 8 under the EU’s Sustainable Finance Disclosure Regulation (SFDR).

The firm writes that four other Islamic ESG ETFs are set to launch in the upcoming months, these include:

HSBC MSCI World Islamic ESG UCITS ETF

HSBC MSCI Europe Islamic ESG UCITS ETF

HSBC MSCI Emerging Markets Islamic ESG UCITS ETF

HSBC MSCI AC Asia Pacific ex Japan Islamic ESG UCITS ETF

HSBC writes that the index screening methodology first applies a set of Shariah exclusions (e.g. alcohol, gambling & pork related products). This Islamic screen has two levels, financial screening and business activity screening, to ensure compliance with Shariah investment principles. This is followed by a set of norms-based exclusions via a Socially Responsible Investment (SRI) screen (e.g. nuclear weapons & producers of firearms). There will be some overlap between the Islamic and norms-based screening (e.g. tobacco & controversial weapons). The methodology then tilts towards companies with stronger ESG credentials as defined by their MSCI ESG scores.

The ETFs aim to track their respective MSCI Islamic Universal Screened indices as closely as possible. They will be rebalanced annually and the restrictions are applied on a quarterly basis. MSCI applies a dividend purification factor to all reinvested dividends, reviewed on annual basis

Olga de Tapia, Global Head of ETF & Indexing Sales, HSBC AM says: “There is growing appetite for a range of Islamic passive products as investors look to build Shariah compliant multi-asset portfolios. We are proud of our long-term commitment of serving Islamic investors worldwide and excited to bring innovative solutions to these clients.

“We see a natural overlap between faith based screening and standard SRI filters and this set of toolkit funds will provide investors with a pathway to gain holistic risk profiled market exposure in compliance with Shariah law.”

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