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From addressing climate change and labour practices to animal welfare, you can select investments based on your values in a way that could help you achieve your long-term financial goals.
Environmental sustainability continues to remain a priority for Indian businesses and a key component of future business strategy, reveals findings from HSBC's Navigator report, Building Back Better, which surveyed more than 2,600 companies in 14 markets across the world.[@hsbc-navigator]
Investors are increasingly choosing sustainable funds and net zero investment strategies as a way to help create a better world.
By choosing to invest responsibly, you're not only investing in your own future, you're also investing in the positive change and progress of nations, companies and societies as a whole.
Green, social, sustainability and sustainability-linked bonds are currently USD2.2 trillion in size. The 3 green project types that stand out as being particularly suited to funding cities are:
As an investor, you're likely to want to know where your money is going. When you invest sustainably, more of your money is aligned with companies that are making a difference.
Sustainable investing also recognises that companies that aim to solve the world's biggest challenges could be those best positioned to grow.
Environmental and societal challenges can impact share prices. Issues like rising temperatures, higher sea levels and destruction of property drive the need for investments in renewable energy alternatives to reduce carbon dioxide (CO2) emissions.
Factoring these challenges into your investments could help:
Companies that can create value for all stakeholders are more likely to succeed in the long term and deliver stronger financial returns for shareholders and investors.[@esg-and-dinancial-performance]
Remember, the value of any type of investment can fall as well as rise and you may not get back what you invest.
Sustainable investment should be seen as a medium to long-term commitment, meaning you should be prepared to invest for at least 5 years.
30% growth is expected by some businesses to result from a focus on sustainability.
While they broadly mean the same thing, there are some key differences in the way the different types of sustainable investing work. These are important to know before you choose how to invest.
These methodologies can be referred to as:
Let's take a closer look at some of the main approaches and what they involve.
Ethical investing
Ethical investing tries to actively avoid companies or industries that might have a negative impact on society and the environment. This is called negative screening. Sectors such as tobacco, animal testing, gambling and oil and gas are typically excluded from this type of investing.
ESG investing
ESG investing actively selects companies that meet specific environmental, social and governance requirements. It's less restrictive than ethical investing as it considers companies that are adapting, such as oil companies that invest in clean energy.
Impact investing
Impact investing actively selects companies whose positive impact on the world can be measured. This might include companies that generate a specific amount of recycling or save a certain amount of water.
How to invest in a transitioning economy is a key challenge for investors. At HSBC, we use the ESG framework to measure the level at which a company is tackling environmental, social and governance issues.
Our climate change policy, for example, is aimed at increasing the climate resilience of our clients' investments, as well as contributing towards financing the transition to a low-carbon economy.
We use relevant data and analysis - including scenario analysis - to inform our investment decisions.
| Issues | Example | Factors include |
|---|---|---|
| Environmental | What impact does the company have on the environment? |
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| Social | How is the company supporting its employees, clients and communities? |
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| Governance | How is the company governed or managed? |
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| Issues | Environmental | Environmental |
|---|---|---|
| Example | What impact does the company have on the environment? | What impact does the company have on the environment? |
| Factors include |
|
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| Issues | Social | Social |
| Example | How is the company supporting its employees, clients and communities? | How is the company supporting its employees, clients and communities? |
| Factors include |
|
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| Issues | Governance | Governance |
| Example | How is the company governed or managed? | How is the company governed or managed? |
| Factors include |
|
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At HSBC, we're fully committed to our agreed sustainability approach and compliance with the sustainability commitments that we have made in the public domain.
For more information on HSBC sustainability activities and policies, please see the HSBC Group Sustainability page and the Green Bond Framework.
We've developed specific Sustainability Risk Policies for sectors in which we have considerable business and where there is potentially high adverse impacts on people and the environment.
More information can be found at http://www.hsbc.com/citizenship/sustainability/finance
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