HSBC Global Asset Management launched new 'P' share classes for its HSBC US Government Money Market Fund (HGPXX) and US Treasury Money Market Fund (HTPXX), adding them to a growing list of "D&I" or "Social" money market fund share class options. A brochure for the funds, entitled, "Diversity, Equity and Inclusion - The 'P' Share Class," tells us, "Our 'P' Share Class is designed with Purpose in mind -- to enable your firm's greater Purpose." It states, "Investors face ever greater pressures from shareholders, customers, and from within their organizations, to use their position to make a positive impact on the world. We all want to make sure the work we do is making a difference, and to ensure everything we do aligns with this Purpose. Our 'P' share class is designed to help investors align their day-to-day cash investment activities with their social ambitions. The share class is dedicated to charitable giving, with a focus on addressing issues at the intersection of gender, racial, and ethnic inequality in our societies. We allocate a proportion of the share class fee to go to select non-profit partners on your behalf."
The document explains, "You will be supporting charities that focus on addressing issues at the intersection of gender, racial, and ethnic inequality in our societies. We choose our Partners with Purpose based on a number of criteria, including their proven track record, the impact they make, and their strong governance and transparency. We recognize the need for transparency to ensure that your donations have a meaningful impact."
It says, "Our non-profit partners have been chosen for their ambitious goals but also their proven results reaching them. We work closely with the HSBC Group Corporate Sustainability Team to evaluate potential partners for their social impacts in our communities. We will form new partnerships with charities reflecting the markets in which you operate as the program grows. Once a partner has been identified and selected, we donate a proportion of the fee on the 'P' share class in our MMFs to support the continuation of their important work.... Feeding America is a Partner with Purpose in the USA."
HSBC will be hosting a webinar, "Aligning your cash investment strategy with your corporate purpose on Thursday November 9th, from 2:00-3:00pm EST. Speakers include Barry Harbison, Head of US Liquidity Investment Specialists, Kelly Fisher, Head of Corporate Sustainability, Kristin Lloyd, Global Director of Treasury at Velocity Global, and Jerry Jones, Vice President, Innovative Initiatives & Partnerships, Research & Innovation, Feeding America. The description says, "Learn how you can contribute to tackling such issues by embedding DE&I in the heart of your treasury organization with our new P Share Class, available in our US Treasury and Government Money Market Funds. Our experts will discuss: Our approach to delivering a credible DE&I solution for treasurers; Feeding America's innovative workforce development program; and, How you can seamlessly integrate the philosophy into everyday treasury activities."
In related news, CAVU Securities recently published, "DEI Money Funds: Advancing DEI Goals and Impact Objectives by Investing in Institutional Money Market Funds." They state, "As organizations look to advance Diversity, Equity, and Inclusion (DEI) goals, an impactful and quite frankly 'too easy to sound true solution' is becoming more popular: investing the organization's cash into Institutional Money Funds that have a DEI/ESG framework. The goal of this whitepaper is to analyze the current options available and to clarify the impact each offers as organizations increasingly want to ensure the solution(s) they utilize are measurable and make a meaningful difference. This paper will focus on the impact based upon the easiest definable metric -- the money fund's expense ratio.... Notably, there are differences in each impact strategy."
Cavu Securities continues, "This whitepaper addresses three main points: How is an Impact created? The types of options will be identified and discussed. Based on the type of option utilized, how impact is generated will vary. What amount of Impact is being created? The amount of ERI generated from the various options. The details of payments made from the fund's expense ratio will often drive the level of impact created. Where is the Impact felt? Where and for whom the impact is realized.... In looking at the options available for investors, we believe there are three 'categories' that emerge: Diverse Dealers Trading Funds (DDT), Fund Sponsor Donation Funds (FSD) and Diversity Firm Share Classes (DFSC)."
On DDTs, CAVU says, "It is the fund's intention to trade with Diverse Dealers. [But there is no expense ratio] impact since no portion of a fund's expense ratio is paid to the DD. The DD earns revenue like any dealer would on a fixed income trade; the difference between bid and ask (the spread) or if a new issue, the underwriting fee.... These funds are not generally a popular option because impact is unknown and likely to be minimal. Short term trades earn dealers very little (which money funds primarily transact) especially after subtracting items like commission, ticket charges and other expenses."
On "Fund Sponsor Donation Funds," they tell us, "The Fund Sponsor states that a certain percentage of the income earned by the fund sponsor from managing the portfolio or share class will be donated to a specific organization with a mission that has a DEI impact. [But the] ERI Impact varies and is often unknown.... FSD is a welcome addition to the DEI money fund space as Fund Sponsors help to advance DEI. The difficulty here is that an investor will likely have little knowledge of the amount of impact they are making."
Then on "Diversity Firm Share Classes," Cavu writes, "Share Classes (not the entire fund) are created by a Diverse Financial Firm and a Fund Sponsor partnership. The classes reside within a specific fund and are typically branded with the Diverse Dealer's name and [are] actively marketed by the Diverse Dealer. [Expense ratio impact] varies, and likely offers the greatest impact of the options. The ERI is dependent on the agreement between the Fund Sponsor and the Diverse Dealer. Amounts generally range from as low as 10% of the share class's expense ratio to as high as 50%.... The DFSC has the greatest potential ERI and is becoming the most popular solution being used today."
Finally, they add, "As the title states, the focus of this paper has been on DEI impact. We have not covered Money Market Funds that address the 'E' or 'G' in ESG. These funds typically fall into the prime fund segment of money market funds and are managed with screens to determine what can and cannot be invested in (much like an ESG equity mutual fund or ETF). These funds tend to be smaller and hence large organizations may find it difficult to invest in a meaningful way.... Organizations and the professionals who are responsible for investing cash now have real options in which they can carry out the fiduciary responsibility of the organization while having a meaningful and measurable impact on advancing and achieving DEI goals. As investors, you have the opportunity to navigate your options and obtain the clarity around the level of your impact."
For more on ESG see these Crane Data News stories: "Allspring Launches Roberts & Ryan Class; ICD's New Portfolio Analytics" (10/24/23), "UBS Latest to Abandon ESG Money Funds; JNL Liquidates Money Fund" (10/13/23), "Morgan Stanley Latest to Abandon ESG MMFs" (8/16/23), "ESMA, FSB Push European Money Fund Reforms; New HSBC ESG Euro MF" (3/27/23), "Morgan Stanley Names OFN Beneficiary of Impact Shares; ESG to Retail" (10/27/22), "SSGA to Liquidate State Street ESG Liquid Reserves" (9/19/22), "ESG Cash Investments Still Minor Says AFP Liquidity Survey, 6% Over 10%" (6/29/22), "SEC Names Rule Proposal Could Impact or Ban ESG, Social Money Funds" (6/3/22), "Dreyfus Announces New BOLD D&I Share Class with Howard University" (3/1/22), "SSGA Debuts Opportunity Class; BlackRock Bancroft, Cabrera Shares Live" (11/17/21); "More D&I: State Street Files for Blaylock Van Shares; WSJ Hits Tether" (10/27/21); "BlackRock Expands ESG Lineup; Files for New Bancroft, Cabrera Shares" (8/19/21); "Northern Renames Diversity Shares Siebert Williams; Safened Platform" (4/20/21); "Morgan Stanley Files for CastleOak Shares; Bond Fund Symposium Today" (3/25/21); "JP Morgan Launches 'Empower' Share Class to Support Minority Banks" (2/24/21); "Mischler Financial Joins 'Impact' or Social Money Market Investing Wave" (12/5/19); and "Dreyfus Launches 'Impact' or Diversity Government Money Market Fund" (11/21/19). Click here to see the Federal Home Loan Bank Office of Finance's list of D&I or diversity and inclusion, dealers.
