As environmental, social and governance issues increasingly determine the destination of investment funds, Frédéric van Ingelgom, Head of Business Development & Client Management, Asset Managers at HSBC Securities Services Luxembourg, discusses the insights that data and technology can give clients in their ESG investment choices and how it affects their investment decisions.
What type of data and technology does HSBC use to gain insight into clients ESG exposure?
We provide our clients with a monthly portfolio report that gives a comprehensive view of their ESG exposure and score. The report includes data from several sources including MSCI (Morgan Stanley Capital International), Sustainalytics (part of the Morningstar Group) and V.E. (Vigeo Eiris, an ESG rating company). Using a dedicated in-house ESG IT system, we’re able to represent all three vendors’ data in a comparative format, displaying a portfolio score, a breakdown of the E, S & G pillars, as well as details of large positions (high scoring, low scoring and largest carbon emitters). This is a relatively new approach and initial feedback is very positive, we’re already working on further developments and enhancements of the service. For me, it reinforces that even though we are at the end of the supply chain, we can bring ESG value to our clients.
“It certainly gives our clients food for ESG thought, providing them with the opportunity to make reallocations within their portfolios.”
How are such ESG insights received by client?
While it is difficult to measure the impact the comparative data has, we believe it helps clients to have a clear view of their ESG exposure and impact. It’s in the form of a monthly report providing insights that can be used by clients to challenge and engage with their investment decisions. Does it change their behavior? It certainly gives our clients food for ESG thought, providing them with the opportunity to make reallocations within their portfolios.
What other tools and incentives do you identify that will change clients’ behavior?
We are actively seeking additional ESG and sustainability metrics, such as temperature scores, EU taxonomy indicators, sustainable development goals and ESG factors that could be used to extend the scope of our service. We seek to expand the extent to which our monthly reports can provide additional insights that can be used by clients to reassess their investment decisions. It could help them in regards to the new “Taxe d’abonnement” ESG regime designed by the Luxembourg government to encourage the establishment of sustainable investment vehicles and funds that follow environmental, social responsibility and governance strategies.