Hang Seng Indexes launches regulatory-aligned benchmark for climate-focused investors
Hong Kong’s Hang Seng Indexes Company has partnered with Wilshire, a global investment technology and advisory company, to launch the Hang Seng Climate Change 1.5°C Target Index to provide a new benchmark for investors who are interested in integrating climate considerations into their investment portfolios.
The index has been constructed to make reference with the EU Paris Aligned Benchmark (‘PAB’) Standard, which aims to help limit the rise in global temperature to no more than 1.5°C compared to pre-industrial levels by encouraging asset managers to develop investment portfolios that can reduce carbon emissions.
Using the Hang Seng Large-Mid Cap (Investable) Index (‘HSLMIV’) as its underlying index, the Hang Seng Climate Change 1.5oC Target Index makes reference to the minimum requirements set out in the PAB to achieve specific climate improvements. The constituents of the underlying index are screened for their compliance with sustainability-related international guidelines and for involvement in controversial products or services.
After these screenings, the remaining constituents will be re-weighed based on their greenhouse gas (GHG) emission intensities. Constituents with lower GHG emission intensities will enjoy an increased weighting in the Hang Seng Climate Change 1.5oC Target Index, while those with relatively higher GHG emission intensities will be underweighted, in order to achieve an annual reduction in GHG emissions intensity of at least 7% on average and at least a 50% reduction in GHG emissions intensity compared to the underlying index. In reference to the rebalancing on 7 March 2022, the weighted average GHG emission intensities of the Index was 84.7% lower compared with the HSLMIV.
“Hang Seng Indexes Company has been striving to address investors’ growing interest in sustainability and low-carbon economy-focused tools and strategies by enriching its ESG product suite,” said Hang Seng Indexes CEO, Anita Mo.
“Making reference to the relevant requirements of the EU’s Paris Aligned Benchmark guidelines in index construction, the Hang Seng Climate Change 1.5oC Target Index aims to align with the carbon neutrality objective enshrined in the Paris Agreement.
“The launch of this new index will help investors to integrate climate action factors into their investment strategy in order to reduce their exposure to risks related to climate change and to support the acceleration of the transition to a low-carbon future.”
Climate change has become one of the most pressing concerns for nations around the world in recent years. According to a report published by the UN Intergovernmental Panel on Climate Change in April 2022, global greenhouse gas emissions generated by human activity have continued to rise across all major sectors since 2010.
More investors are placing greater importance on climate-related factors and supporting the transition to a low-carbon economy in their investment strategies.
The new index is calculated and disseminated in real-time at two-second intervals.
Earlier this year, Hang Seng Indexes also launched the HSI ESG Screened Index and HSI Low Carbon Index Indexes.