Taiwan pension fund awards $2.3 billion ESG mandate to HSBC, Morgan Stanley and 3 others

HONG KONG, June 24 (Reuters) – The fund management arms of HSBC (HSBA.L) and Morgan Stanley (MS.N) were among three others to win a mandate from Taiwan’s largest pension manager to manage the Asia’s first fund focused on climate change with a total value of $2.3 billion in assets.

Legal & General Investment Management, Schroder Investment Management and Wellington Management were also shortlisted, each of which can manage $460 million in assets, Taiwan’s Bureau of Labor Funds (BLF) said Friday.

About half of BLF’s 5.8 trillion Taiwan dollars ($190 billion) in assets are invested in offshore markets and overseen by global asset managers including BlackRock Inc (BLK.N), Fidelity Investments and PIMCO.

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HSBC’s selection for the climate change-focused fund comes weeks after a senior banker at the lender downplayed climate risks which sparked questions from staff and customers about its commitment to tackling climate change. Read more

Stuart Kirk, global head of responsible investing at HSBC Asset Management, told a conference last month that “climate change is not a financial risk we need to worry about,” comments that prompted HSBC suspend him and conduct an internal investigation.

Last month, the BLF shortlisted about 10 asset managers, including HSBC, from more than 40 global candidates for the mandate, Liu Liju, the fund’s deputy managing director, told Reuters in an interview.

The Taiwanese pension fund, however, hired an independent consultant to assess whether the Asia-focused bank still qualified for a possible role after Kirk’s controversial comments.

The consultant’s review concluded that Kirk’s remarks were ‘reflective of the executive’s personal emotion’, and that HSBC ticked the boxes in fund management background, investment procedure and philosophy investment, Liu said.

“I think HSBC will handle this incident quietly, otherwise the market will give it a very cruel judgment,” Liu said, referring to Kirk’s comments.

The mandate of the BLF is a key milestone at the regional level and managers should expect quarterly and annual reviews by the fund and its consultants to check whether managers are staying on track with a commitment to tackling climate risks, Liu said.

Compared to the MSCI ACWI Climate Paris Aligned Index, it is mandatory for global asset managers to select fund portfolio companies that are constituents of the index.

HSBC Asset Management did not immediately respond to a request for comment from Reuters.

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Reporting by Selena Li; Editing by Sumeet Chatterjee & Shri Navaratnam

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Dolores W. Simon