With growing awareness around climate change, industrial destruction of the environment, and attention on sustainable living, governments have been urging organisations to adopt several operating practices to reduce their carbon footprint. These corporations are now implementing eco-solutions based on such environmental concerns along with a focus on sustainable growth of the company.
Certain industries have faced repercussions for failing to keep a check on efficient energy consumption, pollution control, waste disposal, sustainability of products, logistics and distributions networks, among other factors, that pose a risk to the environment. Non-conformance to green policies will eventually impact the company’s growth prospects, creating a downside risk to the investor’s wealth.
So if you wish to invest in the companies focused on sustainability and reducing their carbon footprint, then you may consider investing in mutual funds that focus on Environmental, Social, and Governance (ESG) parameters for picking stocks.
In India, the concept of ESG investing or funds with focus on climate change is not as widespread as other thematic funds, but globally you may come across several schemes of this kind. There are various fund houses in India like Axis Mutual Fund, ICICI Prudential Mutual Fund, Quantum India Mutual Fund and SBI Mutual Fund that have launched ESG themed funds.
HSBC Global Asset Management India has launched HSBC Global Equity Climate Change Fund of Fund, an open-ended fund of fund scheme investing in HSBC Global Investment Funds – Global Equity Climate Change.
On the launch of this fund, Mr Ravi Menon — CEO of HSBC India Mutual Fund said, “The Climate change is creating a new type of market and investment opportunities across all industries and market capitalisation. Many investors are increasingly focused on environmental matters and this fund is designed to help them achieve a financial return, whilst creating a positive impact on the global environment. This FoF demonstrates our commitment to address global issues whilst offering our investors an opportunity to gain from the same.”
Table 1: Details of HSBC Global Equity Climate Change Fund of Fund
|Type||An open-ended fund of fund scheme investing in HSBC Global Investment Funds – Global Equity Climate Change.||Category||Fund of Fund|
|Investment Objective||To provide long-term capital appreciation by investing predominantly in units of HSBC Global Investment Funds – Global Equity Climate Change (HGECC). The Scheme may also invest a certain proportion of its corpus in money market instruments and / or units of overnight / liquid mutual fund schemes, in order to meet liquidity requirements from time to time. However, there is no assurance that the investment objective of the Scheme will be achieved.|
|Min. Investment||Rs 5000/- and in multiples of Re 1 thereafter. Additional purchase Rs 1000/- and in multiples of Re 1 thereafter.||Face Value||Rs 10/- per unit|
|Entry Load||Not Applicable||Exit Load||
||Benchmark Index||MSCI AC World TRI|
|Issue Opens:||March 03, 2021||Issue Closes:||March 17, 2021|
(Source: Scheme Information Document)
What will be the Investment Strategy for HSBC Global Equity Climate Change Fund of Fund?
The corpus of HSBC Global Equity Climate Change FoF will be predominantly invested in the units of the underlying scheme, i.e. HSBC Global Investment Funds – Global Equity Climate Change.
This Underlying scheme aims to provide long-term total return by investing primarily in companies, listed in either developed or developing countries that are positioned to benefit from efforts to adapt to climate change.
The portfolio of the underlying scheme is driven by active fundamental analysis that enables a focused portfolio of 40-60 stocks, diversified by sector and theme. It will invest in companies having thematic approach in areas such as; renewable energy, green buildings, pollution & waste prevention and control, energy efficiency, sustainable water and waste-water management, clean transport, climate change adaptation, and natural capital & ecosystems.
Consequently, the underlying scheme aims to invest in companies with low carbon emission and a higher environmental, social and governance (“ESG”) rating, calculated respectively as a weighted average of the carbon intensities and ESG ratings given to the issuers of the Underlying schemes investments, than the weighted average of the constituents of the MSCI AC World Net index.
About MSCI AC World Index
MSCI All Country World Index is an equity index designed to track broad global equity-market performance. The Index is used as a benchmark for the performance of global equity funds and as a guide for asset allocation. It comprises of stocks of about 3000 companies from 23 developed countries and 26 emerging markets.
Being a fund of fund, HSBC Global Equity Climate Change FoF will follow passive investing and track the performance of the underlying scheme.
The exposure of underlying scheme in top 10 holdings and sectors, along with the list of exposure in countries as on December 31, 2020:
|Stocks||Weight (%)||Sector||Weight (%)||Country||Weight (%)|
|Prysmian SpA||3.47||Industrials||39.61||United States||33.51|
|Infineon Technologies AG||3.30||Information Technology||24.39||Japan||10.92|
|Schneider Electric SE||3.28||Materials||11.05||France||9.31|
|Ecolab Inc||3.24||Utilities||9.77||United Kingdom||8.29|
|Neste Oyj||3.21||Consumer Discretionary||4.79||Germany||6.63|
|EDP Renovaveis SA||3.04||Energy||3.21||Spain||5.49|
|Deere & Co||2.93||Pooled||1.71||Mainland China||3.94|
|Ball Corp||2.75||Real Estate||1.68||Italy||3.47|
|Accenture PLC||2.63||Consumer Staples||0.75||Ireland||3.45|
(Source: Scheme Information Document)
Apart from minimum 95% of its assets to be invested in units issued by HSBC Global Investment Funds – Global Equity Climate Change (HGECC), the fund may also invest up to 5% of its assets in Money Market instruments (including TREPS & reverse repo in government securities) and units of domestic overnight / liquid mutual funds, in order to meet the liquidity requirements from time to time.
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation of HSBC Global Equity Climate Change Fund of Fund
|Instruments||Indicative Allocation (% of assets)||Risk Profile|
|Units issued by HSBC Global Investment Funds – Global Equity Climate Change (HGECC)||95||100||High|
|Money Market instruments (including TREPS & reverse repo in government securities) and units of domestic overnight / liquid mutual funds||0||5||Low to Medium|
(Source: Scheme Information Document)
Who will manage HSBC Global Equity Climate Change Fund of Fund?
Mr Priyankar Sarkar (for overseas investments) and Mr Kapil Punjabi (for fixed income) will be the dedicated fund managers for HSBC Global Equity Climate Change FoF.
Mr Priyankar Sarkar is Associate Vice President – Equities at HSBC Asset Management (India) Pvt. Ltd. and he has over 8 years of experience in research. Prior to this, he was associated with Motilal Oswal Asset Management Company Ltd. as Analyst, D E Shaw India Pvt. Ltd. as Analyst and with organisations such as; S. Mullick Chartered Accountants and Gujarat State Petroleum Corporation.
Mr Sarkar B.E (Hons) and MBA (Finance) and he currently manages these schemes — HSBC Global Consumer Opportunities Fund, HSBC Global Emerging Markets Fund, HSBC Brazil Fund, HSBC Asia Pacifi c (Ex Japan) Dividend Yield Fund.
Mr Kapil Punjabi is Vice President & Fund Manager – Fixed Income at HSBC Asset Management (India) Pvt. Ltd. and he has over 14 years of experience in research and fixed income management. Prior to this, he was working with Taurus Asset Management Company Ltd. as Fund Manager – Fixed Income, Edelweiss Asset Management Ltd. Fund Manager – Fixed Income, Edelweiss Securities Ltd. as Manager Investment, Trans Market Group Research (India) Pvt. Ltd. as Research Analyst and Proprietary Trader.
His qualifications include B.M.S and M.M.S. Currently, schemes under his management are: HSBC Overnight Fund, HSBC Low Duration Fund, HSBC Ultra Short Duration Fund, HSBC Debt Fund, HSBC Cash Fund, HSBC Fixed Term Series – FTS 130 to 137, 139 and 140, For Fixed Income portion HSBC Equity Hybrid Fund and HSBC Regular Savings Fund.
Fund Outlook – HSBC Global Equity Climate Change Fund of Fund
With rising demands for mutual funds aligned to a theme that supports environmental concerns, there has been an increase in growth opportunities for investors with focus on sustainable investing.
Classified as a fund of fund, the performance of HSBC Global Equity Climate Change FoF will depend on the investments made in the underlying scheme. The underlying scheme has a thematic solution-focused approach to select a range of exposures throughout the growing universe of companies that are willing to create a better tomorrow across developed and emerging markets, industries and market capitalisation.
The underlying scheme is diversified across countries such USA, Eurozone, UK, Japan, etc., as well as industries such as Industrials and Technology. But do note that investment in international equities can be prone to geopolitical risk, currency risk, regulation risk, etc.
Though this fund may be beneficial from a diversification and investment in international equities perspective, if you wish to invest in this fund, you need to ensure that you have a higher risk tolerance to bear with the market volatility, long investment horizon and investment objective that aligns with the fund.
This article first appeared on PersonalFN here