HSBC Asset Management has unveiled four new socially responsible ETFs focused on value and small-cap segments within developed and emerging markets.
Olga de Tapia, Global Head of ETF and Indexing Sales at HSBC Asset Management.
The HSBC MSCI World Value ESG UCITS ETF (HWVL LN) and HSBC MSCI World Small Cap ESG UCITS ETF (HWSC LN) have been listed on London Stock Exchange with further listings across major European exchanges expected in the near future.
Each ETF comes with an expense ratio of 0.25% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
The remaining two funds – the HSBC MSCI Emerging Markets Value ESG UCITS ETF (HEMV LN) and HSBC MSCI Emerging Markets Small Cap ESG UCITS ETF (HESC LN) – are due to be rolled out in the coming weeks.
Each ETF will come with an expense ratio of 0.35% and will also be classified as Article 8.
Olga de Tapia, Global Head of ETF & Indexing Sales, HSBC Asset Management, said: “Our aim is to build a toolkit that allows investors to incorporate different factor exposures, starting with the value factor and small capitalization. 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 capitalization indices.”
Global value
HWVL is linked to the MSCI World Target Value SRI Screened World & Emerging Index which is based on the parent MSCI World universe of large and mid-cap stocks across 23 developed markets globally.
The methodology removes companies that are embroiled in severe ESG-related controversies, are involved with controversial weapons, or derive more than 2.5% of their revenue from thermal coal.
The index then utilizes an optimization weighting process that seeks to maximize the index’s exposure to the value factor (based on price-to-book and earnings yield metrics) alongside a 20% improvement to its overall ESG score.
Global small-cap
HWSC, meanwhile, tracks the MSCI World Small Cap ESG Leaders SRI Select Index which is based on the MSCI World Small Cap universe of small-cap stocks from developed markets globally.
The index follows MSCI’s ‘ESG Leaders’ approach which first excludes companies with business activities in the alcohol, tobacco, gambling, nuclear power, and weapons industries as well as firms that are embroiled in severe ESG-related controversies.
The methodology then selects the securities with the highest sector-specific ESG scores while targeting a 50% sector representation versus the initial universe. Firms with ratings below BB (lower average) are not eligible for inclusion. The selected constituents are weighted by float-adjusted market capitalization.
Emerging markets value
HEMV will utilize the same investment approach as described above for HWVL but applied to an initial universe of large and mid-cap stocks from 24 emerging markets worldwide.
Emerging markets small-cap
HESC, meanwhile, will be linked to the MSCI Emerging Small Cap Select SRI Screened ESG Index which begins with an initial universe of small-cap stocks from emerging markets.
The index selects companies demonstrating a robust ESG profile as well as a positive trend to improving that profile while maintaining suitable diversification across countries and sectors.