KUALA LUMPUR: HSBC in Malaysia launched its first environmental, social and governance (ESG) Islamic structured product in the country.
The landmark ringgit principal protected participation floating rate Islamic negotiable instruments linked to Hang Seng Corporate sustainability index is an ESG-related Islamic structured product which is 100% principal protected if held to maturity.
The product offered by HSBC Amanah provides customers the opportunity to invest in a product that matches their values when it comes to environmental and social causes, it said in a statement on Tuesday.
The bank said this was in line with Bank Negara Malaysia’s value-based intermediation (VBI) initiative.
It pays fixed coupon of 3.90% per annum (three years tenor) and 4.50% per annum (four years tenor) in the first two years of the investment. Payout at the end of third and fourth year is subject to Hang Seng Corporate Sustainability Index performance and subject to cap of 5.90% and US$-Ringgit adjustment.
Hang Seng Corporate Sustainability Index tracks the performances of Hong Kong listed companies that excel in corporate sustainability.
HSBC said ESG investing is the concept of incorporating Environmental, Social and Governance factors alongside traditional financial factors in investment process. ESG investing generally aims to generate long-term financial returns whilst contributing positively to society.
Some of the common topics examined under ESG investing process are climate change impact, energy efficiency, human rights, consumer privacy, gender equality, health and safety, corporate governance, business ethics and more.
Essentially, the ESG-related Islamic Structured Product offered by HSBC Amanah provides customers the opportunity to invest in a product that matches their values when it comes to environmental and social causes.
The ESG Islamic Structured Product is open for subscription to HSBC / HSBC Amanah Premier customers from June 10 to June 21, 2019.
“Investment strategies incorporating ESG have seen rapid global growth in recent years. The main factors driving ESG asset growth, among others, include the demand from asset owners and risk mitigation whereby ESG factors can be financially material,” said Tara Latini, country head, retail banking and wealth management, HSBC Bank Malaysia.
“The launch of the ESG Islamic Structured Product is indeed in line with HSBC Group’s aspiration in sustainable investment and reflects the Group’s overarching commitment to global sustainable development. We at HSBC believe that ESG factors can be used to drive portfolio outperformance and investors should consider these factors when making investment decisions.
“In fact, here in Malaysia as well as worldwide, we see more asset owners embracing the notion that long-term sustainability needs to be embedded in their investment processes,” Latini added.
According to the latest data by Global Sustainable Investment Alliance (GSIA) published in April 2019, global sustainable-investing assets grew 34% to US$30.7 trillion in 2018 from US$22.9 trillion in 2016.
The CEO of HSBC Amanah Malaysia Arsalaan Ahmed said HSBC in Malaysia has always been at the forefront of innovation in Islamic banking and the introduction of the ESG Islamic Structured Product clearly demonstrates HSBC’s pioneering strength in Islamic finance, particularly with regard to product innovation.
“Following the successful launch of the world’s first United Nations Sustainable Development Goals sukuk in October last year, the launch of the ESG Islamic Structured Product clearly demonstrates our continued commitment to the Government of Malaysia’s efforts to promote Malaysia as an Islamic finance hub and is a strong testament to HSBC’s leadership in sustainable financing and investments” he said.
“Additionally, the ESG Islamic Structured Product is also in line with Bank Negara Malaysia’s VBI initative that seeks to shift the focus of the Islamic finance industry to integrate environmental and social tenets into banking activities.”
Head of Global Markets, HSBC Bank Malaysia, Alvin Kong, said: “HSBC has been one of the market leaders in offering structured products to our customers in this country while the group is at the forefront of driving ESG Sustainable investments.
“Leveraging on these strengths and also our Amanah proposition in Malaysia, we are pleased to offer the first ESG Islamic structured product in Malaysia. As thematic ESG investments grow, we are confident that we can build on our global reach and in-house capabilities to provide more alternative ESG solutions to cater to our customers’ needs.”
The views expressed in this article are the author’s own and do not necessarily reflect Saray Consultancy’s editorial stance.
Edib Smolo is the Founder and CEO of SARAYCON – Saray Consultancy for Socially Responsible & Ethical Finance. Currently, he is an assistant professor of finance at International University of Sarajevo. He has extensive experience in fields of Islamic banking and finance.
He holds a PhD in Islamic finance. He is an expert on Islamic finance and banking. In addition to a large number of scientific papers, he is also the author of the book “Introduction to Islamic Economics and Finance: Theory and Practice” (in Bosnian language) published in 2013.