Together with MSCI ESG Research, HSBC has launched two index funds – HSBC MSCI Europe Select SRI index and HSBC MSCI World Select SRI index.
Both funds exclude investments in controversial sectors. These include companies active in the fields of arms, nuclear power, alcoholic beverages, tobacco, genetic manipulation of crops (other than purely research and development), gambling and adult entertainment. If their revenues in these businesses exceed the thresholds set by the MSCI SRI Index Methodology, the Funds may not invest.
Entirely excluded are companies that do not meet the MSCI criteria for compliance with humane working conditions. Weapons (civil and military) as well as high percentage alcoholic drinks in the company portfolio are also absolute exclusion criteria. Moreover, for a better carbon footprint, the funds do not invest in companies that hold coal or other fossil fuel reserves.
Subsequently, the remaining equity portfolio is optimised to maximise the ESG score and to minimize tracking error – a possible bias – to the benchmark indices. In doing so, companies with a high ESG score are overweighed according to the MSCI ESG Focus Index methodology. This results in a better ESG score over the overall portfolio than in the benchmark indices.
The investment objective of the funds is to track the performance of the MSCI Europe Select SRI or MSCI World Select SRI benchmark indices as accurately as possible. For this purpose, the physically replicating funds invest, while maintaining an appropriate mix of risks, in a European or global equity portfolio consisting essentially of the titles of the benchmark indices.
“The funds will ensure unprecedented inclusion of sustainability aspects in the equity investment. The sustainability criteria are an important lever for portfolio optimisation and thus for the opportunity-risk profile. The new index funds will provide investors with a good alternative to the fund structures running on the parent indices, “said Jan Wilmanns, member of the board of HSBC Germany.