HSBC on ESG Integration in MMFs
HSBC Asset Management recently posted materials on "Integrating ESG in Liquidity Fund portfolios," which included a brief video on "ESG Integration in money market funds." Barry Harbison tells us, "The term ESG integration is often used when describing how environmental, social and good governance issues are considered as part of an investment strategy. But what does integration mean and where does it fit in the range of ESG investment strategies? Integration is defined by the UN principles and responsible investment as the explicit and systematic inclusion of ESG issues and investment analysis and investment decisions." Jonathan Curry explains, "At HSBC Asset Management, we've integrated ESG factors into our investment processes since 2007 and have been continuously developing our processes to maintain our position as a recognized leader at the forefront of ESG integration." Harbison continues, "ESG factors are integrated across 90 percent of the assets we manage globally, including in the credit analysis of the issuers our money market funds invest in. This helps us to identify and manage risks arising from ESG factors that may impact the financial performance of issuers. As an example, in the past we have removed issuers from our improved credit list based on shortcomings and their governance processes." Curry then says, "ESG integration is clearly an important part of our focus, but we do not believe that relying on ESG integration alone qualifies as investment product to hold itself out as having ESG as part of its investment objective." Harbison comments, "Under the European Sustainable Finance Disclosure Rules, a fund that uses ESG integration alone will likely fall under Article 6, whereas funds that go beyond ESG integration with an investment objective that is actively focused on environmental or social characteristics will fall under Articles 8 or 9." Curry adds, "Our ESG focus money market investment strategy will go beyond ESG integration using ESG scoring and a range of screens to identify the available issues that are better at addressing ESG risk than their peers." For more on ESG and Social MMFs, see these recent Crane Data News stories: "BlackRock Converts Fed Trust to Social MMF; CastleOak Expands Team (9/15/21), "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); "Invesco Files for Cavu Secs Class" (12/18/20); "ESG and Social MMF Update: Mischler News, Green Deposits, Reg Debate" (12/4/20); "Goldman Launches Social Class; Tiedemann Adds FICA; CS Green ABCP" (1/24/20); "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).
