HSBC Asset Management has entered the highly competitive climate ETF space with the launch of a global Paris-aligned Benchmark (PAB) strategy, ETF Stream can reveal.

The HSBC MSCI World Climate Paris Aligned UCITS ETF (HPAW) is listed on the London Stock Exchange with a total expense ratio (TER) of 0.18%.

HPAW tracks the MSCI World Climate Paris Aligned index which offers exposure to large and mid-cap companies across 23 developed market countries.

The ETF looks to reduce exposure to transition and physical climate risks by applying a range of metrics such as climate value-at-risk while aligning with the Paris Agreement requirements of a 1.5ºC climate scenario.

This is achieved by tracking the European Union’s PAB – introduced in November 2019 – which targets a carbon intensity reduction of at least 50% relative to the investment universe as well as an annual decarbonisation target of at least 10%.

Furthermore, the index seeks to reduce the weight of companies assessed as high carbon emitters using Scope 1, 2 and 3 emissions while increasing the weight of companies with credible carbon reduction targets.

HPAW is classified as Article 9 under the Sustainable Finance Disclosure Regulation (SFDR).

Olga de Tapia (pictured), global head of ETF sales at HSBC AM, said: “Investors are increasingly aware of the threat climate change poses to their long-term objectives.

“With companies, governments and individuals pledging to limit global warming in line with the Paris Agreement, ensuring investment portfolios achieve net-zero emissions by 2050 is an important step towards reaching this goal.

“HPAW will provide investors with a set of climate-focused building blocks that have the potential to become a widely accepted climate benchmark over time.”

Are climate change ETFs greenwashing?

Following the release of the PAB and Climate-Transition Benchmark (CTB) by the EU, a number of index providers created indices that offer exposure to the two benchmarks.

Lyxor was the first ETF issuer to launch in March 2020 and was subsequently followed by Deka, Amundi, Franklin Templeton, BlackRock, Tabula, BNP Paribas Asset Management and UBS Asset Management