41511 - DCM REGIO Fund

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Summary of Investment Information

Project Number

41511

Company Name

HSBC REAL ECONOMY GREEN INVESTMENT OPPORTUNITY GEM BOND FUND SCSP

Date SPI Disclosed

May 2, 2022

Country

World Region

Region

Global

Projected Board Date

Apr 8, 2019

Environmental Category

FI-1 - Significant

Status

Active

Last Updated Date

May 3, 2022

Department

CFGCM - Global Industry, Financial Markets/Capital Markets - FIG

Industry

Funds

Previous Events

Approved : May 2, 2019
Signed : Jun 28, 2019
Invested : May 25, 2020

Sector

Other Non-Private Equity Fund

Project Description

The project involves the establishment of a minimum US$750 million climate risk focused emerging markets fund, the HSBC Real Economy Green Investment Opportunity GEM Bond Fund (the “Fund”), managed by HSBC Global Asset Management (“HSBC GAM”). The Fund will help channel resources primarily from developed markets to finance climate related projects in developing countries. The Fund will achieve this goal by mobilizing capital from institutional investors, mostly, in developed countries and investing the capital in green bonds and to a lesser extent sustainability bonds issued by financial and real sector entities in developing countries. The issuing entities will in turn invest the proceeds of the bonds in eligible climate and social impact projects under a suitable framework

Associated Advisory Engagement

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	100.0

Development Impact

Supporting the development of green bond market in emerging markets: IFC's experience in climate financing and ability to leverage tools/platforms such as the Sustainable Banking Network will enable IFC to provide support to potential issuers. These IFC interventions will help create a supply of emerging market green bonds for socially responsible investors including the Fund. Mobilization of private sector funds, IFC stamp of approval: The Project will mobilize up to US$1 billion from private investors.

E&S Category Rationale / Risks and Mitigation

The proposed project is a fixed income asset fund focused on investing in listed and private placement green and sustainability bonds, as defined by ICMA Green Bond Principles and Sustainability Bond Guidelines of 2018, issued by corporations operating in target emerging markets and other eligible fixed income assets such as Pure Play general corporate purpose bonds from issuers where at least 90% of corporate revenues are associated with Green Projects. The Fixed Income Asset Manager will maintain a medium E&S risk profile of the fund portfolio and will avoid investments in bonds supporting assets exposed to considerable E&S risks such as a) significant involuntary resettlement, b) risk of adverse impacts on Indigenous Peoples, c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage or d) significant Occupational Health and Safety risks. Given the size of the fund as well as the current stage of Green Bond market development, including support services such as second opinion providers or ESG data providers, IFC has categorized this project as FI-1. The Fixed Income Asset Manager will apply a tailor-made ESMS system allowing for the exclusion of assets exposed to significant E&S and reputational risks as defined in the Performance Standards and the Exclusion List extended by fossil-fuel extraction and refining, power generation from fossil fuels (including clean coal projects), transmission of fossil fuels - wholesale transmission of oil or gas by pipeline or electricity from fossil fuel generating plant to substation, first generation liquid biofuel production and those not meeting relevant national E&S laws.

The uniqueness of capital market investments in fixed income instruments is about proper selection of assets upfront. The Fixed Income Asset Manager may not have bilateral relationships with project sponsors of assets to be supported through bond issuances. The E&S due diligence process to be conducted by the Asset Manager will be based on verifying publicly available information, information acquired from specialized market data providers, followed by reviewing a second opinion (as recommended by Green Bond Principles) and finalized by applying special filters such as excluded activities and consistency with the key objectives of the Performance Standards. The Asset Manager will neither have the ability to require any specific E&S performance improvements nor be in a position to conduct assessment of E&S risks at the asset level. IFC appraisal confirmed that the selected Fixed Income Asset Manager has a sound and sophisticated E&S risk management process codified as the Green Impact Investment Framework including a) application of exclusion lists; b) verification of quality of assets based on publicly available information; and c) reporting to the investors. The Asset Manager has a sizable E&S team allowing for sound and timely E&S risk assessment.

S.no	Title	Anticipated Completion Date	Status
1	Formalize procedures	06/20/2019	Completed
7	Other1 - Establish External Communication Mechanism	06/20/2019	Completed

Contacts

For Inquiries About the Project, Contact

HSBC Global Asset Management
Melissa McDonald
Global Head of Product – Equities and Responsible Investment
+44 (0) 20 7024 0825
melissa.mcdonald@hsbc.com
Canada Place, 8 Canada Square, Canary Wharf, London E14 5HQ, United Kingdom
n/a

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