HSBC World ESG Biodiversity Screened Equity UCITS ETF
The importance of biological diversity
The wealth of plants, animals, microorganisms and their interactions is known as Biodiversity.
Natural ecosystems are under threat as a result of deforestation, land degradation, pollution of the water, air and soil, hunting and harvesting and climate change. Companies will face ongoing challenges relating to reporting and disclosure which mean heightened risk of litigation besides the obvious physical and transition risks.
Four quantifiable environmental pressures
Investors have an opportunity to make a difference.
HSBC World ESG Biodiversity Screened Equity UCITS ETF
HSBC Asset Management has introduced the first biodiversity screened ETF providing investors with the opportunity to build biodiversity ‘risk aware’ considerations into their portfolios. Our product contains a unique set of biodiversity and ESG screening criteria, reassuring investors that their capital is being invested in way that will help mitigate biodiversity risk.
We have partnered with Iceberg Data Lab (IDL), who use the ‘Corporate Biodiversity Footprint’ (CBF) to identify the impact of corporations on biodiversity across the globe using the four pressure framework. We have jointly developed a biodiversity screening methodology which builds upon the CBF with a number of additional biodiversity specific filters, to ensure the index comprehensively assesses the biodiversity risk that corporations face.
Source: Euronext, Iceberg Data Lab and HSBC Asset Management June 2022.
The CBF is a key ingredient to the screening methodology and uses the Mean Species Abundance (MSA)2 measure for measuring biodiversity degradation. The CBF score assesses four of the most material pressures on biodiversity on a sector adjusted basis. The scores therefore should not be thought of as a like-for-like comparison across sectors.
HSBC Asset Management is committed to creating opportunities for investors which enable them to have a positive impact, by incorporating sustainable considerations within their portfolios.
1. The CBF Score: On each economical super-sectors a CBF financial ratio is calculated as follows:[CBF Absolute (in km2.MSA)/Capital Employed (in €Mn)]. CBF scores are calculated on a range from 1 to 6, 1 being the best (lowest CBF Financial Ratio) and 6 the worst (highest CBF Financial Ratio). The threshold between each score is defined sector by sector and are set to ensure an equal repartition by number of constituents. Sector by sector, an even distribution of issuers, ranked by their CBF Financial ratio, is then built. This is a “best in class” approach, which means that the CBF score of constituents are not comparable between sectors (a corporate scored “2” in a sector may have a higher relative impact on Biodiversity than a corporate rated “5” in another sector).
2. MSA measures the mean species abundance of native species in a delimited space relative to undisturbed ecosystems (%), this is a reference metric used by the IPCC, the Conventions on Biological Diversity (CBD) and the United Nations (IPBES)
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Biodiversity & nature
Our objectives and approach -
Key risks
The value of an investment in the portfolios and any income from them can go down as well as up and as with any investment you may not receive back the amount originally invested.
- Counterparty Risk: The possibility that the counterparty to a transaction may be unwilling or unable to meet its obligations
- Derivatives Risk: Derivatives can behave unexpectedly. The pricing and volatility of many derivatives may diverge from strictly reflecting the pricing or volatility of their underlying reference(s), instrument or asset
- Exchange Rate Risk: Changes in currency exchange rates could reduce or increase investment gains or investment losses, in some cases significantly
- Index Tracking Risk: To the extent that the Fund seeks to replicate index performance by holding individual securities, there is no guarantee that its composition or performance will exactly match that of the target index at any given time (“tracking error”)
- Investment Leverage Risk: Investment Leverage occurs when the economic exposure is greater than the amount invested, such as when derivatives are used. A Fund that employs leverage may experience greater gains and/or losses due to the amplification effect from a movement in the price of the reference source
- Liquidity Risk: Liquidity Risk is the risk that a Fund may encounter difficulties meeting its obligations in respect of financial liabilities that are settled by delivering cash or other financial assets, thereby compromising existing or remaining investors
- Operational Risk: Operational risks may subject the Fund to errors affecting transactions, valuation, accounting, and financial reporting, among other things
Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet such forecast, projection or target.
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Detailed information for article 8 and 9 sustainable investment products, as categorised under the Sustainable Finance Disclosure Regulation (SFDR), including; description of the environmental or social characteristics or the sustainable investment objective; methodologies used to assess, measure and monitor the environmental or social characteristics and the impact of the selected sustainable investments and; objectives and benchmark information, can be found at: Sustainability related disclosures
Pursuant to AMF Doctrine 2020-03, this product is not classified/ non compliant. Any communication aimed at non-professional investors must state the following: “investors should note that, relative to the expectations of the Autorité des Marchés Financiers, this fund presents disproportionate communication on the consideration of non-financial criteria in its investment policy.” In any case, marketing communication shared with non-professional clients will have to be adapted to meet AMF guidelines for retail communications.