September 13, 2018 Read More →

HSBC: Investors see money to be made in green portfolios

Bloomberg:

Make money first, save the planet second. Those are the reasons for most investors to get into green finance, according to HSBC Holdings Plc.

Financial returns were cited as the biggest reason to have a strategy focused on the environment, social issues and governance, known as ESG, according to a survey of 868 institutional investors by the U.K.’s largest bank. Nearly three quarters of companies with this focus said that this was their number one driver, followed by tax incentives.

“For the first time, financial returns are being cited as a primary reason,” said Daniel Klier, group head of strategy and global head of sustainable finance at HSBC. “Previously it was largely regulation and stakeholder pressure.”

Until recently, it was unclear whether ESG meant sacrificing on performance. Investments at the other end of the spectrum such as oil and gas stocks have typically outperformed more volatile and immature renewable energy stocks. Green finance was thought of in a similar vein as impact investing, which prioritizes social change over returns. The HSBC report signals that this mentality is shifting.

Companies with strong ESG scores “tend to exhibit operational excellence – and are more resilient to perils ranging from ethical lapses to climate risks,” said Brian Deese, global head of sustainable investing at BlackRock Inc. “We also believe that sustainable portfolios do not have to compromise return goals, and may even enhance risk-adjusted returns in the long run.”

There is also rising evidence that green-tilting portfolios are outperforming benchmarks or at least matching them, according to Omi. Legal & General’s Future World equity index fund beat its benchmark in the first year. The fund has divested from oil companies including Rosneft Oil Co PJSC and Occidental Petroleum Corp., saying that they were too lax on environmental protection.

More: Most Investors Are Going Green to Make Money, HSBC Says

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