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Decode the Circular Economy and REthink the future

Transitioning to the Circular Economy is critical to ease demand on our planet’s natural resources and deliver sustainable economic growth. Regenerative by design, the objective of the transition is to minimise waste while providing a new world of opportunity for investors where preservation drives prosperity.

HSBC Asset Management is decoding the Circular Economy to enable investors to rethink their investments and become part of the solution. As part of this move forward, we have launched our HSBC GIF Global Equity Circular Economy fund.

We are delighted to collaborate with the Financial Times on a series of three articles highlighting the benefits of adopting a Circular approach.
Explore how finance can help the transition to a circular economy, how digitalisation unlocks the circular economy and why reducing waste is a solid business opportunity .
Read the full articles below:

What is a Circular Economy?

The demand on our planet’s natural resources is unsustainable.*
Feeding into the desire for positive change, the Circular Economy helps conserve and optimize finite resources while opening up investment opportunities and delivering sustainable economic growth.

*Data as at April 2020. Source: Message for Earth Day 2020

 

 

 

Why should we act now?

Why should we act now?

*Data as at April 2020. Source: Message for Earth Day 2020

 

Current linear model: take, make, use, waste

Current linear model: take, make, use, waste 

Exhaustion of natural resources and water pollution

Exhaustion of natural resources and water pollution

  • • Rarefication of industrial materials and fossil fuels
  • • 80 per cent of water waste is untreated before re-entering the ecosystem1

Soaring CO2 emissions and waste

Soaring CO2 emissions and waste

  • • Global emissions of CO2 have risen by c. 50 per cent since 19902
  • • 5 tons of waste is produced by the average European each year3

Deterioration of Biodiversity & living conditions

Deterioration of Biodiversity and living conditions

  • • Loss of 83 per cent of wild mammal biomass and over 40 per cent of plants4
  • • Commodity shortages lead to mass starvation

 

Society is increasingly embracing the circular economy transition

Society is increasingly embracing the circular economy transition

Regulations and Governments worldwide are moving fast forward on Circular Economy

  • November 2019: African Durban Declaration
  • March 2020: European Green Deals Circular Economy Action Plan
  • July 2021: China’s 5-year Circular Economy Plan
  • February 2021: Circular Economy strategies across Latin America

Society calls for action…

  • Environmental activists and IPCC* report urge for changes in consumptions and waste
  • Consumers are more and more mindful of sustainable consumption practices
  • Geopolitical tensions stress the urgent need for resources sovereignty

More investors and companies are looking into circular economy integration

  • EU taxonomy to include specifics on circular economy (criteria and thresholds) by end 2022
  • Increased numbers of companies are disclosing Circular economy’ KPIs** and strategies

1: January 2022, Visualized: The Circular Economy 101
2: June 2019, Plastic pollution facts and information
3: June 2022, Climate Change - United Nations Sustainable Development
4: May 2022, Waste and recycling

*IPCC = Intergovernmental Panel on Climate Change, **KPIs = Key Performance Indicators Source: HSBC Asset Management. June 2022. The commentary and analysis presented in this document reflect the opinion of HSBC Asset Management on the markets, according to the information available to date. They do not constitute any kind of commitment from HSBC Asset Management.


 

 

 

Circular Economy helps resolve the world’s most pressing challenges

Circular Economy delivers on several UN Sustainable Goals, especially:

Investors are catalyzing change through portfolios focused on Sustainable Development Goals

Examples:
Goal 12: Responsible Consumption and Production
Every second, the equivalent of a rubbish truck load of clothes is burnt or buried in landfill.
In a circular economy for fashion, products are used more, made from safe and recycled or renewable inputs, “made to be remade”, recycled or composted. Hazardous substances to health or the environment are designed out3.

Goal 6: Clean Water & Sanitation
72 per cent of all water withdrawals are used by agriculture4. The most impacted regions (West Asia, Pacific) export scarce water through food and cotton products to net importers like Europe and North America.
Efficient textile and food production means massive decrease in water stress in Asia.

 

1: January 2022, Visualized: The Circular Economy 101
2: The Global Circularity Report 2021
3: Source: Fashion and a circular economy | Ellen MacArthur Foundation
4: February 2021, Scarcity | UN-Water

Source: HSBC Asset Management, June 2022. The commentary and analysis presented in this document reflect the opinion of HSBC Asset Management on the markets, according to the information available to date. They do not constitute any kind of commitment from HSBC Asset Management.


 

 

 

Why consider investing in Circular Economy

Hear from our expert

Bénédicte Mougeot, SRI Equity Fund Manager and Head of Climate Equity presents our Circular Economy investment strategy.

Getting to know the Circular Economy

Ever wondered how the Circular Economy is central to developing efficient practices that conserve resources and eliminate waste? Watch the video to know more about HSBC’s Circular Economy strategy, the portfolio philosophy and the benefit it brings to investors.

An opportunity for investors

Investing in solutions to the long-term sustainability challenges we face offers an added benefit for those who want their capital to contribute to improved outcomes beyond investment returns.

How does the Circular Economy open up opportunities?

 

Companies

Companies

  • • Well prepared for commodity shocks, lower input costs, less dependent on other parties
  • • Securing demand, benefiting from improved customer loyalty
  • • Proven Circular Economy business models enhance ROCE*

* ROCE = Return on capital employed

Customers

Customers

  • • Quality over quantity: longer product life cycles; improved transparency and traceability
  • • Deeper customer relationships through customization, reconditioning or repurposing

Society

Society

  • • Healthier environment, less toxicity & pollution, preservation of eco-systems
  • • New avenues for employment through reshoring
  • • Balanced access to resources reduce geopolitical and social tensions

 

Key Risks and Summary Risk Indicators

The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Further information on the potential risks can be found in the Key Information Document (KID) and/or the Prospectus or Offering Memorandum.

  • Capital loss risk: It is important to remember that the value of investments and any income from them can go down as well as up and is not guaranteed. Equity risk: Funds that invest in securities listed on a stock exchange or market could be affected by general changes in the stock market. The value of investments can go down as well as up due to equity markets movements
  • Small & Mid cap risk: Please note that the fund is invested in securities issued by companies which, due to their small or mid market capitalization, are less liquid and may present higher risks
  • Foreign Exchange risk: Where overseas investments are held, the rate of exchange of the currency may cause the value to go down as well as up. Variations in exchange rates between currencies can have a significant impact on the performance of the products presented
  • Emerging market risk: Investments in emerging markets have by nature higher risk and are potentially more volatile than those made in developed countries. Markets are not always well regulated or efficient and investments can be affected by reduced liquidity
  • ESG risk: "sustainability risk" means an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment.

The SRI (Summary Risk Indicator) is an overall indicator of the product risk level. The scale varies from 1 (least risky) to 7 (most risky). Historical data may not be a reliable indication for the future. The rating is not guaranteed to remain unchanged and the categorisation may shift over time. The lowest rating does not mean a risk-free investment. Do not run any unnecessary risk. Read the Key Information Document.

Summary Risk Indicator (SRI) = 4 out of 7
SRI >= 4. The fund has a high risk indicator. The value of investments can go up as well as down.

Summary Risk Indicator (SRI) = 4 out of 7

Risk and Reward profile

The SRI (Summary Risk Indicator) is an overall indicator of the product risk level resulting from the combination of market risk and credit risk. The scale varies from 1 (least risky) to 7 (most risky). Historical data may not be a reliable indication for the future. The rating is not guaranteed to remain unchanged and the categorisation may shift over time. The lowest rating does not mean a risk-free investment. Do not run any unnecessary risk. Read the Key Investor Information Document.
The fund has a high risk indicator. The value of investments can go up as well as down.

Today, we and many of our customers contribute to greenhouse gas emissions. This is why HSBC Asset Management, together with other asset managers, have an important role to play in supporting the transition to a net zero economy. Step by step, we are developing strategies to reduce our own emissions and to help our customers reduce theirs. For more information visit https://www.assetmanagement.hsbc.com/about-us/net-zero

Disclaimer

HSBC GIF Global Equity Circular Economy is a sub fund of HSBC Global Investment Funds, a Luxemburg domiciled SICAV. Before subscription, investors should refer to Key Information Document (KID) of the fund as well as its complete prospectus. For more detailed information on the risks associated with this fund, investors should refer to the complete prospectus of the fund. The shares of HSBC Global Investment Funds have not been and will not be offered for sale or sold in the United States of America, its territories or possessions and all areas subject to its jurisdiction, or to United States Persons.

Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. The commentary and analysis presented in this document reflect the opinion of HSBC Asset Management on the markets, according to the information available to date. They do not constitute any kind of commitment from HSBC Asset Management. Consequently, HSBC Asset Management will not be held responsible for any investment or disinvestment decision taken on the basis of the commentary and/or analysis in this document.