HSBC Debuts its First Paris-Aligned Equity ETF

HSBC Asset Management has launched the HSBC MSCI World Climate Paris Aligned UCITS ETF (HPAW LN), the firm’s inaugural ETF aligned with the Paris Agreement’s goal of limiting global warming to 1.5°C above pre-industrial levels.

The fund has listed on London Stock Exchange in US dollars and comes with an expense ratio of 0.18%.

It is linked to the MSCI World Climate Paris Aligned Index which is based on the parent MSCI World universe of large and mid-cap stocks from 23 developed countries globally.

The index construction methodology first removes companies involved in controversial weapons, tobacco, and thermal coal, as well as firms deriving significant revenue from oil and gas-related activities.

The remaining securities are then reweighted based on the risks and opportunities associated with the climate transition. MSCI harnesses a diverse array of data and analytics to feed into the construction process including scope 1, 2, and 3 carbon emissions, green revenues, and the index provider’s own proprietary low carbon transition score and climate value-at-risk measures.

The index offers an immediate 50% reduction in weighted average carbon intensity as well as a further 10% annual decarbonization going forward.

It also aims to deliver on a range of secondary objectives such as maximizing exposure to sustainable energy providers, increasing the weight of companies with clear carbon reduction targets, minimizing fossil fuel exposure, and reducing climate value-at-risk by 50%.

Due to the fund’s environmental objectives, the fund qualifies as an Article 9 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).

Olga de Tapia, Global Head of ETF Sales at HSBC Asset Management, said: “Investors are increasingly aware of the threat climate change poses to their long-term objectives. With companies, governments, and individuals pledging to limit global warming in line with the Paris Agreement, ensuring investment portfolios achieve net-zero emissions by 2050 is an important step towards reaching this goal.

“The new HSBC MSCI Paris Aligned ETF series will provide investors with a set of climate-focused building blocks that have the potential to become a widely accepted climate benchmark over time”.

Paris-aligned strategies have proven popular with ETF product developers, with Lyxor, Amundi, Franklin Templeton, UBS, BlackRock, and BNP Paribas all having rolled out products in this space.

The ETF builds on HSBC’s existing climate-conscious ETF line-up. In June last year, the firm launched a suite of funds which combine ESG and low carbon methodologies. This suite comprises seven ETFs linked to FTSE Russell indices that focus on global developed, US, European, UK, Japanese, Asia Pacific ex-Japan, and emerging market equities. These funds come with expense ratios between 0.12% and 0.25%.