Why Sustainable Investing Matters | Investments - HSBC MT (2024)

The world of finance might often seem quite removed from discussions around sustainability, but in fact sustainable investing is a concept that has gained considerable traction over the past few years, with many major companies placing Environmental, Social and Governance (ESG) factors at the heart of their operational principles.

While traditional investment strategies might focus purely on profit and returns, sustainable finance looks at a holistic range of additional priorities, such as helping to build a better world, reducing damage to the environment and society, and creating long term sustainable opportunities for all. These goals are captured within the ESG model which many companies are electing to adopt.

Environmental factors encourage investors to consider how companies manage their impact on our planet, through issues such as greenhouse emissions, waste and pollution, resource depletion and deforestation.

Social factors reflect how a company manages relationships with employees, clients and the wider community, on issues such as human rights, development and treatment of staff, stakeholder health and safety and oversight of the company’s supply chain.

Governance considers how easily a company might be held accountable for its actions by looking at the diversity and structure of their Board of Directors, their business ethics, accounting standards, culture, transparency and regard for shareholder rights.

Sustainability, in all its forms, is becoming a focal point for capital market investors and issuers alike. According to the HSBC Sustainable Finance and Investing survey carried out in 2019, 94% of investors consider ESG important.

This is why so many companies today are looking at how they can implement ESG factors as a way to supplement and complement profitability. In the long term, overlooking these factors can not only threaten the supply chain, but could also put a company’s goodwill and stock price at risk.

A study conducted by Barclays in 2018 shows that Millennials (those under the age of 40), are particularly concerned about environmental and social issues. In fact, 43% of respondents under the age of 40 had invested in sustainability themed instruments compared to 9% of those aged 50-59 and 3% of those aged over 60. The reasons behind this can vary, but more extensive education in school syllabuses and concern around climate change can be considered as key contributors.

Advances in technology are also contributing to the cause. Electric vehicles, accompanied by significant advancement in battery technology, are one typical example. Driven by increased awareness on environmental concerns, a study by Bloomberg NEF states that sales of electric vehicles are expected to increase by 90 times between 2015 and 2040, and account for 35 per cent of total car sales.

Regulation is also playing a very important role in sustainable finance, acting as a key driver for responsible investment as policy makers and regulators seek to put the global financial system on a more sustainable footing and address the long term challenges of climate change and global inequalities. As an example, the European Commission launched its Action Plan on Financing Sustainable Growth in March 2018. The Action Plan aims to deliver upon the commitments that the EU made at the Paris climate conference in December, 2015.

Whilst a significant amount of public investment has already gone into green initiatives, the EU and EU National Governments recognise that if funding requirements for such initiatives are going to be met, then significant private investment will also be necessary. The EU’s Action Plan therefore aims to reorient private capital flows towards sustainable investments, to meet its climate and energy targets. Regulations to help the EU to deliver on its Action Plan will be phased in over a number of years.

The EU Green Finance regulations apply to a wide array of financial market participants such as investment firms, fund managers, insurance undertakings and pension providers. The key initiatives from this programme reflect the EU’s commitment to sustainability and low carbon transition agenda. A series of regulations and directives are expected to be rolled out as from March of 2021, with the application of the Disclosure Regulation. The Taxonomy, Low Carbon Benchmark Regulations as well as the ESG Updates to MIFID II, AIFMD and UCITS Directive will follow suit in the years to come.

As we have outlined above, a wide variety of forces and factors are aligning towards the ultimate goal of making sustainable investing not just the preference but the norm, contributing to the long term benefit of investors and communities alike.

Companies with good ESG performance tend to have better corporate governance, and hence the advantage of long-term sustainability. Integrating ESG factors into the process of investing not only brings benefits to society, but also effectively manages risks, and creates opportunities for investors.

As we continue to monitor changing consumer habits, it seems clear that ESG sustainable brands and companies are significantly more likely to be well placed to seize long term opportunities in the future.

Interested in learning more about sustainable investments and ESG? Visit our Investment Academy

This article was written by Konrad Borg Myatt, CEO of HSBC Global Asset Management (Malta) Limited. It first appeared in The Times of Malta on 3 August 2020.

Why Sustainable Investing Matters | Investments - HSBC MT (2024)

FAQs

Why Sustainable Investing Matters | Investments - HSBC MT? ›

While traditional investment strategies might focus purely on profit and returns, sustainable finance looks at a holistic range of additional priorities, such as helping to build a better world, reducing damage to the environment and society, and creating long term sustainable opportunities for all.

Why does sustainable investing matter? ›

Key Points. Sustainable investing promotes long-term economic growth by encouraging companies to operate more ethically and responsibly. It helps protect the environment by directing capital towards sustainable practices and technologies.

What is sustainable investing HSBC? ›

Sustainable investing allows you to invest in companies that have a positive impact on the world. Find out how the fund you choose could make a difference.

What is the sustainability commitment of HSBC? ›

We're committed to the transition to net zero

It's a pillar of our strategy as a business. We aim to achieve net zero in our operations and supply chain by 2030 and in our financing portfolio by 2050.

What are HSBC sustainable finance targets? ›

HSBC has established a goal of allocating up to $1trn to sustainable finance by 2030. Today (3 May), a statement will be read at the annual general meeting (AGM) of the bank on behalf of the coalition by responsible investment non-profit ShareAction.

What are the cons of sustainable investing? ›

However, there are also some cons to ESG investing. First, ESG funds may carry higher-than-average expense ratios. This is because ESG investing requires more research and due diligence, which can be costly. Second, ESG investing can be subjective.

Does sustainable investing really help the environment? ›

Yes, it does. ESG investing, often referred as sustainable investments, can ultimately deliver aspects of both worlds — save the planet and potentially deliver financial performance. For decades, human activities have been blamed for harming our environment, wildlife, and climate.

Is it worth investing with HSBC? ›

Investment expert's opinion

This service is a decent start for less confident investors looking for the security of a big brand bank, and some handholding along the way. Onboarding feels quite long and it's hard to keep up the enthusiasm to complete. Charges are fair (less than 1% in Year One) which includes advice.

What is the sustainability policy of HSBC asset management? ›

At HSBC Asset Management, we believe the future needs to be self-sustaining for positive change. Besides taking into account climate risks in managing clients' portfolios, we are committed to opening up a world of sustainable investment opportunities for our clients through the development of innovative products.

Why is HSBC so successful? ›

HSBC's success as a global financial services provider can be attributed to its strategic expansion into new markets. The company recognized the potential for growth in Asia and began expanding its operations in the region in the 1980s.

What is the role of ESG in HSBC? ›

ESG and sustainable investing at HSBC

Our fund managers, HSBC Global Asset Management (UK) Limited, assess the sustainability of the companies they invest in by scoring them against 3 sets of criteria: environmental, social, and governance factors (known as 'ESG').

What is HSBC's strategy? ›

We've committed to: Support our customers. Embed net zero into the way we operate. Partner for systemic change. Become net zero in our operations and supply chain by 2030, and our financed emissions by 2050.

What are the goals of HSBC 2030? ›

Our ambition is to be net zero carbon emissions in our own operations and supply chain by 2030. This means managing the emissions of more than 30,000,000 sq ft (equivalent to nearly 10,700 tennis courts) of offices, branches and data centres around the world, and those of close to 29,000 suppliers.

What is the environmental issue of HSBC? ›

HSBC is one of the world's biggest funders of fossil fuels in the world. * In the 7 years since the Paris Agreement, the banks in this category have funneled $5.5 trillion USD into coal, oil, and gas, rapidly accelerating the climate crisis.

What is the value of sustainable investing? ›

Sustainable investment AUM grew by over 32 percent between 2016 and 2022, and reached a value of around 30.3 trillion U.S. dollars in 2022. Total assets under management globally reached around 124.5 trillion U.S. dollars that year.

Why investing in sustainability is good for business? ›

Employees choose sustainable companies, work there longer and with higher productivity. Employees are more conscious of environmental issues and demand action from their employers. So taking action and connecting with your staff to do this can have a positive impact on staff morale, recruiting and retaining staff.

What is ESG investing and why is it important? ›

This type of ethical investing strategy helps people align investment choices with personal values. ESG stands for environment, social and governance. ESG investors aim to buy the shares of companies that have demonstrated a willingness to improve their performance in these three areas.

Is sustainability information important to investors Why or why not? ›

Investors gain several benefits from sustainability reporting, including: 1. Risk Mitigation: Identifying and managing environmental, social, and governance (ESG) risks. 2. Long-Term Performance: Enhanced understanding of non-financial factors impacting long-term financial performance.

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