April 2019

Sandra Carlisle

Senior Responsible Investment Specialist

How sustainable investing can help achieve financial

returns and impact objectives

For professional clients only.

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What is sustainable investment?

Source: HSBC Global Asset Management as at March 2019.

For us, it considers the environment and society

It supports the delivery of the Paris Climate Agreement and the UN Sustainable Development Goals

It builds on the foundations of our commitment to the PRI

Active ownership is an essential part of our approach

As global asset managers and investors, we engage directly with companies we invest in, to encourage best practices

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Why invest sustainably?

The state of our planet, wellbeing of society and behaviours of corporates are all related issues with significant consequences

All these factors have a direct impact on the economy and companies, and are driving how corporates behave

Gender equality is not only a fundamental human right, but a necessary foundation for a peaceful, prosperous and sustainable world1

With more products and services focused on sustainability in all areas of life, there is a clear logic in considering the sustainability of the

companies we invest in

Source:

1. UN’s Sustainable Development Goal n. 5;

2. Equileap’s Gender Equality Global Report and Ranking 2018 Guardian news.

The world’s largest social media platform faced a privacy scandal in 2018, after allowing third parties access to its

users’ data without their permission, breaching the European Union’s General Data Protection Regulation

The largest American car manufacturer is one of just two global businesses that have pay equality in top, middle

and bottom bands, and no overall gender pay gap across the company2

A leading oil and gas producer has announced it will establish short-term carbon emissions’ targets in 2020,

and plans to link executive pay to hitting these targets

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Temperatures are rising

0.8

0.6

0.4

0.2

0.0

0.2

0.4

0.6

1880 1900 1920 1940 1960 1980 2000 2020

Temperature Anomaly (0C)

Source: Earth System Research Laboratory (NOAA)

CO2 concentration on the rise

ppm

410

385

390

395

400

405

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2015

2016

2014

2013

The biggest challenge: climate change

The scale of the challenge

Climate change is the number one long-term investment risk1

The Paris Climate Agreement has created a global framework to

tackle climate change. It is a catalyst for change with far-

reaching investment implications

Climate change will impact company business models and

earnings in three likely ways:

1. Regulation or policies. This could be regulation to limit CO2

emissions or pricing carbon emissions though carbon taxes or

carbon trading schemes;

2. Direct, physical impacts such as localized flooding or drought

causing disruption to food supply chains

3. Liability. Large carbon extractors and emitters could be held liable

to pay compensation to third parties that have suffered the

negative effects of climate change

NASA Goddard Institute for Space Studies

Hadley Centre/Climatic Research Unit

NOAA National Centre for Environmental Information

Japanese Meteorological Agency

1. World Economic Forum Global Risks Perception Survey 2018, 13th edition

Source: NASA. Temperature data from four international science institutions show rapid warming in the past few decades and that the last decade has been the warmest on record.

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Top 10 risks in terms of

Likelihood

Climate change as an investment risk

Climate change tops the long-term investment risk list

1 Extreme weather events

2 Failure of climate-change mitigation and adaptation

3 Natural disasters

4 Data fraud or theft

5 Cyber-attacks

6 Man-made environmental disasters

7 Large-scale involuntary migration

8 Biodiversity loss and ecosystem collapse

9 Water crisis

10 Asset bubbles in a major economy

Top 10 risks in terms of

Impact

1 Weapons of mass destruction

2 Failure of climate-change mitigation and adaptation

3 Extreme weather events

4 Water crises

5 Natural disasters

6 Biodiversity loss and ecosystem collapse

7 Cyber-attacks

8 Critical information infrastructure breakdown

9 Man-made environmental disasters

10 Spread of infectious diseases

Economic EnvironmentalGeopolitical SocietalTechnological

Categories

Managing climate-related investment risk is a priority for our clients

Source: World Economic Forum Global Risks Perception Survey 2019, 14th edition

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How to invest sustainably

ESG integration Ethical screeningPositive

screening/SRI

ThematicSingle theme e.g. water

Multi theme e.g. demographics

Impact investing Philanthropy

Financial return maximisationNon-financial impact onlyFinancial return and

sustainability outcomes

A sliding scale of outcomes and impact

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Investing with impact: the Sustainable Development Goal agenda

The 17 SDGs aim to tackle poverty, inequality and climate change

Designed as a framework for countries, they translate into risk and opportunity

for investors

Public funding alone cannot close the gap

2-3% of global GDP is needed to meet the SDGs

Public and private capital is aiming to work together to plug the funding gap

Investors are responding and seeking investment solutions that are SDG-

aligned and meet their purpose needs

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Source: HSBC Global Asset Management as at March 2019.

Responsible investment is integrated into our investment philosophy and approach across asset classes

We were an early signatory of the Principles of Responsible Investment (PRI) in 2006

In the 2018 PRI annual assessment, we retained an A+ score for overall RI strategy and governance

In 2018, we won the Outstanding Award -- Sustainable Investment by Benchmark Fund of the Year Awards in Hong Kong.

ESG ingrained into our DNA

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Sustainable leadership

Additional resource materials

Responsible investment long term commitment

Responsible investment leadership

201720112007 2018

SRI Euroland Equity Global Equity

Climate Change

Global Lower Carbon EquityGlobal Sustainable

Multi Asset Global Lower Carbon Bond

20042001

SRI Equity SRI Bond

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Source: HSBC Global Asset Management as at March 2019.

In 2018, we voted more than 73,000 resolutions at over 7,000 company meetings across 74 markets (Asia Pac 30% -

developed markets 11.7%, emerging 18.7%)

In 2018, we supported 1,074 shareholder resolutions; among these, we supported more than 158 resolutions on

environmental and social issues

In 2018, we held engagements (across equity and fixed income) which included ESG issues with 1,219 companies in

58 countries (Asia Pac 27% - developed markets 9.9%, emerging 17.3%)

We will continue our active engagement as lead and supporting investors under the Climate Action 100+ initiative, co-

filing shareholder resolutions at ExxonMobil and BP

Active ownership or making a difference

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Finally…

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