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ESG Investing
Hang Seng launches climate change index
Regulatory-aligned benchmark helps asset managers develop climate friendly portfolios
The Asset 17 May 2022

Hang Seng Indexes Company and investment technology firm Wilshire have launched the Hang Seng Climate Change 1.5°C Target Index to provide a new benchmark for investors who are interested in integrating climate considerations into their investment portfolios.

The index has been constructed to make reference with to the EU Paris Aligned Benchmark (PAB) standard, which aims to help limit the rise in global temperature to no more than 1.5 degrees Celsius compared with pre-industrial levels by encouraging asset managers to develop investment portfolios that can reduce carbon emissions.

Climate change has become one of the most pressing concerns for nations around the world in recent years. Global greenhouse gas (GHG) emissions generated by human activity, according to a report published by the UN Intergovernmental Panel on Climate Change in April 2022, have continued to rise across all major sectors since 2010. And more investors are placing greater importance on climate-related factors and supporting the transition to a low-carbon economy in their investment strategies.

Using the Hang Seng Large-Mid Cap (Investable) Index (HSLMIV) as its underlying index, the Hang Seng Climate Change 1.5°C Target Index, which is calculated and disseminated in real-time at two-second intervals, makes reference to the minimum requirements set out in the PAB to achieve specific climate improvements. The constituents of the underlying index are screened for their compliance with sustainability-related international guidelines and for involvement in controversial products or services.

After these screenings, the remaining constituents will be re-weighed based on their GHG emission intensities. Constituents with lower GHG emission intensities will enjoy an increased weighting in the index, while those with relatively higher GHG emission intensities will be underweighted, to achieve an annual reduction in GHG emissions intensity of at least 7% on average and at least a 50% reduction in GHG emissions intensity compared with the underlying index. In reference to the rebalancing on March 7 2022, the weighted average GHG emission intensities of the Index was 84.7% lower compared with the HSLMIV.

“Hang Seng Indexes Company has been striving to address investors’ growing interest in sustainability and low-carbon economy-focused tools and strategies by enriching its ESG product suite,” says Anita Mo, CEO of Hang Seng Indexes Company. “The launch of this new index will help investors to integrate climate action factors into their investment and support the acceleration of the transition to a low-carbon future.”

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