The 15 funds include 14 actively managed funds and one index-tracking ETF, divided into five categories, based on a Morningstar search.
First, low-carbon funds, whose portfolios usually have a lower carbon footprint relative to the benchmark index as they invest in companies with reduced carbon intensity. Funds in the category completely exclude investments in fossil fuels. Investors who hope to invest in a well-diversified portfolio with broad equity exposure may invest in this category.
Morningstar identified HSBC GIF Global Lower Carbon Equity Fund to be the only fund available to Hong Kong investors under this category. The $285m fund posted a 15.3% annualised return over the last three years.
Second, climate-conscious funds which are exposed to firms that are geared to the transition to a low-carbon economy.
The Schroder International Selection Fund Global Climate Change Equity and the Templeton Global Climate Change Fund are categorised as climate-conscious funds by Morningstar.
Both funds are under the alternative energy equity sector. The $5.17bn Schroder fund posted a 25.9% return over the last three years, while the $1.21bn Templeton fund reported a 17.6% return over the same period.
Third, investors can also gain exposure to companies benefiting from products and services that contribute to the low-carbon transition via climate-solutions funds.
These funds are less diversified and often overweight in small companies in the industrials and technology sectors.
Morningstar identifies six funds under this category: BNP Paribas Funds Global Environment Classic Fund, HSBC GIF Global Equity Climate Change Fund, Invesco Energy Transition Fund, Jupiter Global Ecology Growth Fund, Ninety One Global Strategy Fund Global Environment Fund, and Pictet Global Environmental Opportunities Fund.
Fourth, clean-energy/tech funds are products investing in companies that contribute to or facilitate clean energy transition and are more sector specific than climate-solutions funds.
There are four funds in Hong Kong which fall under the category, namely BGF Sustainable Energy Fund, BNP Paribas Energy Transition Fund, Global X China Clean Energy ETF, and Pictet Clean Energy Fund.
Finally, green-bond funds, which invest in debt instruments that finance projects facilitating the transition to a green economy.
These funds often offer exposure to sectors such as renewable energy, energy efficiency, pollution prevention, and control etc.
Hong Kong investors can invest in the Allianz Green Bond and Amundi Funds Emerging Markets Green Bond. The Allianz fund posted a 3.4% annualised return over the last three years, while the Amundi fund, which was launched in August 2020, posted a year-to-date loss of 2.86%.
More choices than ever
The number of climate funds is rapidly increasing as asset managers develop products to help investors to decarbonise their portfolios and invest in green solutions.
During the first nine months of 2021, there were 186 new climate funds incepted, bringing the total number of climate funds to 636, according to Morningstar Direct. The AUM of climate funds has increased 50% to reach $275bn.
