Asia outdoes US in ‘climate economy’

HSBC: Investors scouting for low-carbon ventures

MANILA, Philippines—Asia-Pacific nations reported better results than the United States when it came to providing goods, products and services that helped in easing the impact of climate change, according to a financial metric pioneered by British banking giant HSBC.

In a statement, HSBC said climate-friendly firms in Asian countries, excluding Japan, outperformed their US-based counterparts by 33 percent since the bank started tracking the data in 2004.

At the same time, these firms outperformed global equities by an average of 64 percent since the inception of the index, buoyed by large and direct government investments in clean energy and manufacturing capacity.

Building on the success of the HSBC Climate Change Benchmark Index—the first comprehensive Climate Change Index launched in 2007—HSBC has since initiated regional and country climate change indices.

These indices give fund managers the opportunity to invest in specific elements of global climate change on a selective and focused basis, the bank said.

These indices are based on the same quantitative framework as the benchmark index and will enable investors and asset allocators to track and monitor climate-related investments and the transition from a high to low carbon economy for listed companies on a global, regional and country basis for the first time.

In practice, this means that clients can now build a climate change portfolio with targeted exposure in one country or region—such as Asia-Pacific without Japan, which has already risen by 78 percent this year—to better fit their overall investment strategy and objectives.

“With long-term interest rates low, investors are on the lookout for new growth areas, and many governments are keen to play their part by creating a regulatory framework that encourages climate change measures,” HSBC global head of quantitative equities research Joaquim de Lima said.

“It’s increasingly clear that governments and investors alike are convinced that climate change is both real and a viable business opportunity,” he added. “However, as this sophistication has grown, so has the need to offer greater granularity and investment opportunity.”

De Lima and his team introduced their groundbreaking work in this rapidly emerging sector in 2007, in consultation with economist and climate change authority Lord Stern.

The index has grown from 166 companies in January 2004 to 380 companies today.

Formally launched in September 2007, HSBC’s proprietary industrial classification model for climate change was specifically constructed to capture and track on a purely quantitative basis the stock market performance of global companies that are best placed to profit from the challenges presented by climate change and the transition to a low carbon economy. The index excludes companies whose engagement in the subject has yet to become meaningful to their revenues.

“Many western countries have relied on [corporations] acting to tackle climate change, but in Asia we’ve seen governments actually taking the lead—46 percent of global climate change stimuli spending is concentrated in Asia ex-Japan, according to our index framework,” HSBC specialist Vijay Sumon said.

“Many clients are looking at this closely, and are becoming increasingly interested in gaining exposure to climate-related investment opportunities focused on specific countries and regions.” –Daxim Lucas, Philippine Daily Inquirer