April 2019
Sandra Carlisle
Senior Responsible Investment Specialist
How sustainable investing can help achieve financial
returns and impact objectives
For professional clients only.
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What is sustainable investment?
Source: HSBC Global Asset Management as at March 2019.
For us, it considers the environment and society
It supports the delivery of the Paris Climate Agreement and the UN Sustainable Development Goals
It builds on the foundations of our commitment to the PRI
Active ownership is an essential part of our approach
As global asset managers and investors, we engage directly with companies we invest in, to encourage best practices
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Why invest sustainably?
The state of our planet, wellbeing of society and behaviours of corporates are all related issues with significant consequences
All these factors have a direct impact on the economy and companies, and are driving how corporates behave
Gender equality is not only a fundamental human right, but a necessary foundation for a peaceful, prosperous and sustainable world1
With more products and services focused on sustainability in all areas of life, there is a clear logic in considering the sustainability of the
companies we invest in
Source:
1. UN’s Sustainable Development Goal n. 5;
2. Equileap’s Gender Equality Global Report and Ranking 2018 Guardian news.
The world’s largest social media platform faced a privacy scandal in 2018, after allowing third parties access to its
users’ data without their permission, breaching the European Union’s General Data Protection Regulation
The largest American car manufacturer is one of just two global businesses that have pay equality in top, middle
and bottom bands, and no overall gender pay gap across the company2
A leading oil and gas producer has announced it will establish short-term carbon emissions’ targets in 2020,
and plans to link executive pay to hitting these targets
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Temperatures are rising
0.8
0.6
0.4
0.2
0.0
0.2
0.4
0.6
1880 1900 1920 1940 1960 1980 2000 2020
Temperature Anomaly (0C)
Source: Earth System Research Laboratory (NOAA)
CO2 concentration on the rise
ppm
410
385
390
395
400
405
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015
2016
2014
2013
The biggest challenge: climate change
The scale of the challenge
Climate change is the number one long-term investment risk1
The Paris Climate Agreement has created a global framework to
tackle climate change. It is a catalyst for change with far-
reaching investment implications
Climate change will impact company business models and
earnings in three likely ways:
1. Regulation or policies. This could be regulation to limit CO2
emissions or pricing carbon emissions though carbon taxes or
carbon trading schemes;
2. Direct, physical impacts such as localized flooding or drought
causing disruption to food supply chains
3. Liability. Large carbon extractors and emitters could be held liable
to pay compensation to third parties that have suffered the
negative effects of climate change
NASA Goddard Institute for Space Studies
Hadley Centre/Climatic Research Unit
NOAA National Centre for Environmental Information
Japanese Meteorological Agency
1. World Economic Forum Global Risks Perception Survey 2018, 13th edition
Source: NASA. Temperature data from four international science institutions show rapid warming in the past few decades and that the last decade has been the warmest on record.
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Top 10 risks in terms of
Likelihood
Climate change as an investment risk
Climate change tops the long-term investment risk list
1 Extreme weather events
2 Failure of climate-change mitigation and adaptation
3 Natural disasters
4 Data fraud or theft
5 Cyber-attacks
6 Man-made environmental disasters
7 Large-scale involuntary migration
8 Biodiversity loss and ecosystem collapse
9 Water crisis
10 Asset bubbles in a major economy
Top 10 risks in terms of
Impact
1 Weapons of mass destruction
2 Failure of climate-change mitigation and adaptation
3 Extreme weather events
4 Water crises
5 Natural disasters
6 Biodiversity loss and ecosystem collapse
7 Cyber-attacks
8 Critical information infrastructure breakdown
9 Man-made environmental disasters
10 Spread of infectious diseases
Economic EnvironmentalGeopolitical SocietalTechnological
Categories
Managing climate-related investment risk is a priority for our clients
Source: World Economic Forum Global Risks Perception Survey 2019, 14th edition
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How to invest sustainably
ESG integration Ethical screeningPositive
screening/SRI
ThematicSingle theme e.g. water
Multi theme e.g. demographics
Impact investing Philanthropy
Financial return maximisationNon-financial impact onlyFinancial return and
sustainability outcomes
A sliding scale of outcomes and impact
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Investing with impact: the Sustainable Development Goal agenda
The 17 SDGs aim to tackle poverty, inequality and climate change
Designed as a framework for countries, they translate into risk and opportunity
for investors
Public funding alone cannot close the gap
2-3% of global GDP is needed to meet the SDGs
Public and private capital is aiming to work together to plug the funding gap
Investors are responding and seeking investment solutions that are SDG-
aligned and meet their purpose needs
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Source: HSBC Global Asset Management as at March 2019.
Responsible investment is integrated into our investment philosophy and approach across asset classes
We were an early signatory of the Principles of Responsible Investment (PRI) in 2006
In the 2018 PRI annual assessment, we retained an A+ score for overall RI strategy and governance
In 2018, we won the Outstanding Award -- Sustainable Investment by Benchmark Fund of the Year Awards in Hong Kong.
ESG ingrained into our DNA
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Sustainable leadership
Additional resource materials
Responsible investment long term commitment
Responsible investment leadership
201720112007 2018
SRI Euroland Equity Global Equity
Climate Change
Global Lower Carbon EquityGlobal Sustainable
Multi Asset Global Lower Carbon Bond
20042001
SRI Equity SRI Bond
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Source: HSBC Global Asset Management as at March 2019.
In 2018, we voted more than 73,000 resolutions at over 7,000 company meetings across 74 markets (Asia Pac 30% -
developed markets 11.7%, emerging 18.7%)
In 2018, we supported 1,074 shareholder resolutions; among these, we supported more than 158 resolutions on
environmental and social issues
In 2018, we held engagements (across equity and fixed income) which included ESG issues with 1,219 companies in
58 countries (Asia Pac 27% - developed markets 9.9%, emerging 17.3%)
We will continue our active engagement as lead and supporting investors under the Climate Action 100+ initiative, co-
filing shareholder resolutions at ExxonMobil and BP
Active ownership or making a difference
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Finally…
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