HSBC offers passive investment alternative
HSBC has created the Global Climate Change Index, a fully investable index, providing another way for investors to get exposure to companies that will be positively affected by climate change.
The index is fully quantitative, and includes companies that derive more than 10% their revenues from one or more of 19 investment themes identified by HSBC, within four broader groups: low carbon energy production; energy efficiency; adaptation (i.e. companies that help to adapt to the physical changes of global warming); and financing.
Looking at global companies of a market capitalisation of US$10m or more, HSBC identified 1,000 companies that qualified for inclusion on the index. The investable version of the index comprises only companies with capitalisations of more than US$500m, which comes to 332 companies worth an aggregate US$1.4trn and equal to 2.5% of global market cap, said Kevin Bourne, head of electronic equities at HSBC.
Companies that derive 10%–25% of their revenues from the given investment themes have a weighting of 25% of their market cap in the index; generating 25%–50% of their revenues from them gets a 50% weighting; and above 50% gives a 100% weighting.
The index is not “green” or SRI, said Bourne. It includes, for example, nuclear power companies, which, for better or worse, are likely to benefit from the drive to the low carbon economy, regardless of other environmental factors.
Bourne said that the index has aroused significant interest from pension funds, hedge funds and others who can use the index as a starting-off point but can overlay their own investment parameters, for example focusing on certain regions, excluding certain sectors or shuffling the weightings. “It is not just an index, it’s a toolkit,” said Bourne.