Asia leads in climate change initiatives - HSBC index

MANILA, Philippines - The Asia Pacific region, excluding Japan, is leading the way in providing goods, products and services focused on tackling climate change, according to the latest findings from the HSBC Climate Change Index.

The index is the first comprehensive climate change index started in 2007. HSBC recently launched both regional and country climate change indices, giving clients – for the first time – the opportunity to invest in specific elements of global climate change on a selective and focused basis.

These indices, based on the same quantitative framework as the benchmark index, 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 to one country or region - such as Asia Pacific which has already risen 78 percent this year - which may better fit their overall investment strategy and objectives.

Buoyed by large and direct government investments into clean energy and manufacturing capacity, Asia has been outperforming the global index by 63 percent since 2004 compared to a underperformance of 33 percent by the United States.

HSBC global head of quant research for equities Joaquim de Lima said that 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.

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

Many Western countries have relied on corporates to tackle climate change but in Asia, governments took the lead as indicated by the HSBC data.

Forty-six percent of global climate change stimuli spending is concentrated in Asia based in the HSBC index framework.

 “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,” the global financial institution said.

“This is particularly important for portfolio construction as fund managers can now not only focus on one specific country or region but to actively short one and go long another within the framework of an index,” said Kevin Bourne, head of eEquities and the business sponsor of the HSBC index.

The emerging environment-conscious sector was first clearly defined in 2007 by groundbreaking work from the HSBC Quantitative research team led by De Lima. It has grown globally from 166 companies when first measured in 2004 to the present 380.

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 companies globally that are best placed to profit from the challenges presented by climate change and the transition to a low carbon economy. The HSBC index excludes companies whose engagement in the subject has yet to become meaningful to their revenues.

HSBC Holdings Plc, the parent company of the HSBC Group, is headquartered in London.

It serves customers worldwide from around 8,500 offices in 86 countries and territories in Europe, the Asia-Pacific region, the Americas,the Middle East and Africa. With assets of $2.4 trillion as of June 2009, HSBC is one of the world’s largest banking and financial services organizations.