HSBC Holdings PLC (LSE:HSBA) has made a low exposure to coal and controversial weapons key planks of two new derivative-based investment vehicles.
The launch of the two ESG-focused exchange-traded funds comes just days after HSBC had two adverts banned in the UK for misleading claims over their green credentials.
For companies to be included within the ETFs, less than 2.5% of revenue must come from thermal coal while those making “controversial weapons” are barred altogether, HSBC said.
Controversial weapons normally means weapons of mass destruction – chemical, biological or nuclear – or those of an indiscriminate nature.
In a statement, Olga de Tapia, HSBC Asset Management's global head of ETF and indexing sales, said: “This product set provides investors with a means of building non-standard risk exposures into their portfolios and can be used as an alternative to standard market capitalisation indices.”
HSBC has been embroiled in controversy over its ‘greenwashing’ record in recent years.
The bank is a major lender to fossil-fuel projects and last week the UK’s Advertising Standards Agency banned a series of poster adverts about the bank's green initiatives, as they failed to reference its part in funding fossil fuels and deforestation.
In response to the adverts, campaign group Adfree Cities reported that HSBC had provided £115bn to fossil fuel companies since the signing of the Paris Agreement in 2016, making it the 13th largest funder in the world.
Despite this, the bank is a member of the Net Zero Banking Alliance and is therefore aiming to align lending and investment portfolios with net-zero emissions by 2030.
HSBC’s new ETFs are classified as 'article 8' products under the EU regulation, meaning they “promote environmental or social characteristics,” with the two more ETFs in the series due in coming weeks.
The HSBC MSCI Emerging Markets Value ESG Ucits ETF will track the MSCI Target Value SRI Screened World and Emerging Indices that focusses on firms with high ESG ratings relative to their sectors.
Whilst the HSBC MSCI Emerging Markets Small Cap ESG Ucits ETF will track the MSCI World Small Cap ESG Leaders SRI Select Index and MSCI Emerging Small Cap Select SRI Screened ESG Index, which includes companies with a positive trend in their ESG profiles.