Why sustainable investing could become the new normal
The COVID-19 pandemic made consumers hyper-aware of many downsides to our current practices and way of life. People are showing that they are ready to take a closer look at how they spend their money, and they're taking ESG factors into account.
What is ESG?
ESG is a new rating system that scores companies on how well they perform in 3 categories: Environmental, Social and Governance. Find out more about what experts look for when measuring a company's ESG score.
In response, business and political leaders around the world are pushing for "building back better" and "green recoveries". These and other factors will help sustainable investments become more deeply established1 into the mainstream in 2021, as well as pushing them higher in the long-term.
A global focus on sustainability
In the UK, more than 200 companies have pressured on the government to initiate a green recovery. HSBC is taking a lead role in this regard, having been approached by the UK government to structure their first ever sovereign green bond.
In Germany, the government included EUR40 billion of climate-related spending to boost electric vehicle sales, hydrogen infrastructure and energy efficiency, as part of its EUR130 billion stimulus spending plan.
In the US, newly elected President Joe Biden has proposed a USD2 trillion green energy and infrastructure plan. Meanwhile, China has committed to achieving carbon neutrality by 2060. Here too, HSBC is helping, by backing a massive climate transition bond.
Beyond governments, sustainability is a very consumer-driven, grass roots movement. In an April 2020 YouGov poll2, for example, 42% of people said that Covid-19 had changed how they thought about food, with a third cooking more from scratch and throwing away less. This in turn has had a tangible impact on businesses like national US organic grocery store Whole Foods. The trend is likely to persist and could be a sign of the types of sustainable products that will thrive in a post Covid-19 world.
Technology is also playing a large role in the switch. Lockdowns and social restrictions supercharged online shopping, and business trips became virtual meetings throughout the pandemic. Physical products and services have become virtual products and services, contributing to the growth of sharing and using economies which facilitate the circular economy, a model for sustainable development. The circular economy is beginning to gain traction among businesses and policy makers as we seek efficiency gains in a world of limited resources.
The pandemic has accelerated some consumer sustainability trends such as a shift to online spending and more automation of supply chains. Governments also look keen to support and provide stimulus to sectors that promote sustainability. As an investor, you should be aware of these evolving trends as they may present opportunities for your investment portfolio.
Should you incorporate ESG investments?
HSBC Asset Management believes sustainable investments should be a cornerstone of investor portfolios in 2021. The commitments to sustainability from the world's two largest economies will most likely benefit companies exposed to a wide range of markets, from electric vehicles to renewable energy, infrastructure and more.
How HSBC is helping lead the change
HSBC is firmly committed to leading the way in sustainable finance. We want to build a future that prioritises resilience, social mobility and the environment alongside economic growth. We recognise the potential impact climate change can have on the future we hope to build and have set out an ambition to align our business for a sustainable future.
While we are proud of the recognition we have received as an industry leader for our efforts, including being named the World's Best Bank for Sustainable Finance by Euromoney magazine for two consecutive years, we understand there's still a lot to be achieved.
Here are 6 major projects we're working on:
Giving back with HSBC Amanah Malaysia
HSBC Amanah's new credit cards (now made of 85% recycled materials) allow you to give back to the community and the environment. When you make a donation with the HSBC Amanah credit card to any charity organisation, HSBC will match 1% of the donation amount and donate to an HSBC supported charity.
We currently support four charities, including Yayasan Chow Kit, PERTIWI and Pintar Foundation in Malaysia, and the Global Environment Center at a global level in line with our ambitions to support and create a sustainable future. These are part of HSBC Amanah's larger initiatives to become HSBC Group's first sustainable bank globally.
HSBC Asset Management created a joint venture in 2020 with specialist climate change advisory and investment firm, Pollination.
This joint venture aims to be the world's largest manager of capital invested in natural resources. It enables customers to invest in activities combatting climate change, and protecting and enhancing nature, such as sustainable farming, fishing and forestry.
We plan to turn sustainable infrastructure into a global asset class to fill the investment gap in cleaner, greener infrastructure.
To encourage more investment in building sustainable infrastructure, we are leading the "Finance to Accelerate the Sustainable Transition-Infrastructure" initiative alongside the World Bank Group and Organisation for Economic Development (OECD).
Boosting clean technology
We are setting up a dedicated unit and tailored proposition to support clean technology (CleanTech) innovation companies.
We are targeting USD100 million in investment within a technology venture debt fund for entrepreneurs to develop CleanTech that can be deployed at scale to cut carbon emissions and power sustainable business models.
Supporting sustainable investing
Investors and investment managers are increasingly applying ESG criteria when deciding where to invest their money. Through HSBC Asset Management, we have increased our range of socially responsible investment funds to meet the demand for climate-related investments.
The majority of our work in this area has been recognised with an A+ rating from the Principles of Responsible Investment (PRI).
Becoming a net zero bank
Becoming net zero means reducing the emissions we add to our atmosphere while increasing the amount we remove, so we achieve a balance that protects our planet, while creating a thriving, resilient global economy.
Through our net zero commitment, we aim to:
- achieve net zero in our own operations and supply chain by 2030 or sooner
- use the Paris Agreement Capital Transition Assessment (PACTA) tool to develop clear and measurable ways to achieve net zero
- work with our peers, central banks and industry bodies to mobilise the financial system around a globally consistent standard for measuring financed emissions, and develop a functioning carbon-offset market
- make regular and transparent disclosures to communicate our programmes in line with guidelines set out by the Taskforce on Climate-related Financial Disclosures guidelines. We'll also encourage our customers to do the same
If you would like to learn more about our efforts and how you could play a part in it, please speak to us about our sustainability efforts.