Hong Kong’s stock index provider, Hang Seng Indexes Company has announced the launch of HSI ESG Screened Index and HSI Low Carbon Index this week, as well as a customized ESG related index, the HSI Sustainable Index to support its client’s product development.
“The launch of the [indexes] signifies our commitment to formulating various index products that meet the increasingly sophisticated sustainable finance interests and needs of investors,” said Anita Mo, chief executive officer at Hang Seng Indexes Company.
“The new indexes will serve as investable benchmarks for onshore and offshore investors who are seeking to capture investment opportunities arising from the transition to a lower-carbon and greener economy.”
The HSI ESG Screened Index applies key ESG principles to the existing constitutes of the 60-stock Hang Seng Index (HIS) and screens the companies for their compliance with the United Nations Global Compact Principles and excludes companies if they earn revenues beyond certain thresholds from coal power generation, tobacco and controversial weapons.
The remaining constitutes will be reweighed based on their ESG risk ratings, with an 8% cap on individual constituent weightings.
As of September, the index has 34.1% allocation to financials, 25.4% to information technology, and 13.9% to consumer discretionary.
Since the base date of the index in 2018 to late October 2021, the annualised return of the HSI ESG Screened Index outperformed the HSI by 2.1 percentage points, according to the index compiler.
The HSI Low Carbon Index is also based on the HSI, with company’s weightings adjusted according to their carbon emissions intensity.
The index will give a higher weighting for firms with lower carbon emissions intensities, and vice versa. As of September 2021, the weighted average carbon intensity of the HSI Low Carbon Index was 66.7% lower than the HSI.
As of September, the index has 39.8% allocation to financials, 27.6% to information technology, and 11.5% to consumer discretionary.
The two indices will be reviewed on a quarterly basis.
