HSBC Asset Management has unveiled four value and small-cap ESG ETFs targeting world and emerging market equities, ETF Stream can reveal.
The first of the new range, the HSBC MSCI World Value ESG UCITS ETF (HWVS), launched today and is listed on the London Stock Exchange (LSE) with a total expense ratio (TER) of 0.25%. This will be followed by the HSBC MSCI World Small Cap ESG UCITS ETF (HWSC) with the same TER.
The two emerging market ETFs, the HSBC MSCI Emerging Market Value ESG UCITS ETF (HEMV) and the HSBC MSCI Emerging Market Small Cap ESG UCITS ETF (HESC) will list on 9 and 4 November, respectively, both with TERs of 0.35%.
The value ETFs will track the MSCI Target Value SRI Screened World and Emerging Market indices designed to combine factor and ESG exposure simultaneously.
HSBC AM said the ESG exclusions will remove companies involved in controversial weapons and firms that derive 2.5% or more of their revenue from thermal coal, as per HSBC AM’s recent pledge to phase out its coal holdings by 2040.
As part of the announcement, HSBC AM said it will not launch a new ETF or index fund with more than 2.5% exposure to thermal coal issuers, except for strategies with Paris-aligned 1.5°C objectives or clear divestment pathways.
Meanwhile, the small-cap ETFs will track the MSCI Emerging Small Cap Select SRI Screened ESG index and the MSCI World Small Cap ESG Leaders SRI Select index, both of which exclude companies found “in violation of international norms” and those involved in controversial weapons.
The world small cap index will cover 50% of the underlying MSCI parent index, focusing on companies with high ESG ratings relative to their peers.
The emerging market small cap index will incorporate a “robust ESG profile” as well as a positive trend to improve that profile.
All four ETFs will be labelled Article 8 under the Sustainable Finance Disclosure Regulation (SFDR).
Olga de Tapia (pictured), global head of ETF and indexing sales, said: “Our aim is to build an investor toolkit that allows them to incorporate different factor exposures, starting with the value factor and small capitalisation.
“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 capitalisation indices.”
The launch comes as low volatility and value ETFs recorded the largest outflows in Q3 2022 as investors turned to growth strategies during a brief risk-on period earlier in the quarter.
It is the asset manager’s latest launch since it unveiled the HSBC World ESG Biodiversity Screened Equity UCITS ETF (HBDV) in August.
In April, the UK giant launched the HSBC Europe ex UK Sustainable Equity UCITS ETF (HSXU) tracks the FTSE Developed Europe ex UK ESG Low Carbon Select index.