HSBC adds Paris-aligned EM and APAC ex-Japan ETFs


HSBC Asset Management has expanded its suite of Paris-aligned equity ETFs with two new funds targeting stocks in emerging markets and the Asia Pacific region excluding Japan.

HSBC now offers six ETFs providing core Paris-aligned equity exposures.

The HSBC MSCI Emerging Markets Climate Paris Aligned UCITS ETF (HPEM LN) and HSBC MSCI AC Asia Pacific ex-Japan Climate Paris Aligned UCITS ETF (HPAJ LN) have been listed on London Stock Exchange in US dollars.

The funds are expected to be cross-listed across major European exchanges in the coming weeks.

Paris-aligned ETFs are designed for investors looking to integrate net-carbon-zero considerations into their investment portfolios. The strategy utilizes companies’ forward-looking decarbonization trajectories to construct portfolios that are aligned with limiting global warming to 1.5°C above pre-industrial levels.

The ETFs in HSBC’s Paris-aligned suite are linked to ‘Climate Paris Aligned’ indices from MSCI which are based on some of the index provider’s best-known regional and single-country benchmarks.

In terms of the new funds, HPEM tracks the MSCI Emerging Markets Climate Paris Aligned Index which is based on the parent MSCI Emerging Markets universe of large and mid-cap stocks across 24 developing nations globally.

HPAJ, meanwhile, is linked to the MSCI AC Asia Pacific ex-Japan Climate Paris Aligned Index which is based on the MSCI AC Asia Pacific ex-Japan universe of large and mid-cap stocks across four developed markets (excluding Japan) and eight emerging markets in the Asia Pacific region.

The methodology first removes companies that are 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 indices offer an immediate 50% reduction in weighted-average carbon intensity relative to their starting universes as well as a further 10% annual decarbonization going forward.

They also aim 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%.

HPEM comes with an expense ratio of 0.18%, while HPAJ costs 0.25%.

The funds complement HSBC’s four existing Paris-aligned ETFs which target global developed (based on the MSCI World universe), US (MSCI USA), European (MSCI Europe), and Japanese (MSCI Japan) equity markets.

All six ETFs in the suite are classified as Article 9 products under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).

Olga de Tapia, Global Head of ETF and Indexing Sales at HSBC Asset Management, said: “Enabling our clients to improve the social and environmental impact of their portfolios is a priority for us. With the addition of these two new ETFs, we’re pleased to provide investors and asset allocators a comprehensive suite of core Paris-Aligned building blocks.”

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