The investment objective of the Sub-Fund is to provide investment results that, before deduction of fees and expenses, closely correspond to the performance of the HSI ESG Enhanced Index (the “Index”).
In order to achieve the investment objective of the Sub-Fund, the Sub-Fund will adopt a full replication strategy by directly investing all, or substantially all, of the Sub-Fund’s assets in securities constituting the Index (“Index Securities”) in substantially the same weightings as these Index Securities have in the Index. The Manager will not use a representative sampling strategy other than in exceptional circumstances.
Under exceptional circumstances (i.e. due to restrictions, suspensions of trading, limited availability of certain Index Securities, corporate events, or as the Manager believes there is significant market mispricing or foreseeable market turbulence), where it is not feasible or not in the best interest of investors to acquire certain securities which are constituents of the Index and/or it is not cost efficient, by reference to the Sub-Fund’s Net Asset Value, to use a full replication strategy, the Manager may without prior notice to shareholders, also use a representative sampling strategy to invest in the following, in its absolute discretion, and as often as the Manager believes is appropriate, in order to achieve the investment objective of the Sub-Fund by tracking the Index as closely as possible to the benefit of shareholders:
(i) a representative sample whose performance is closely correlated with the Index, but whose constituents may or may not themselves be constituents of the Index; and/or
(ii) other collective investment schemes (CIS). “CIS” means an exchange traded fund and/or an unlisted index tracking fund which tracks an index that has a high correlation with the Index. The Sub-Fund’s ability to invest in other CIS may not exceed 10% of its Net Asset Value and the Sub-Fund will not hold more than 10% of any units issued by any single CIS; and/or
(iii) financial derivative instruments (FDIs) (e.g. futures contracts) with no more than 10% of the Sub-Fund’s Net Asset Value for investment and hedging purposes, where the Manager believes such investments will help the Sub-Fund achieve its investment objective and are beneficial to the Sub-Fund.
In pursuing a representative sampling strategy, the Manager may cause the Sub-Fund to deviate from the Index weighting on condition that the maximum deviation from the Index weighting of any constituent will not exceed 3% or such other percentage as determined by the Manager after consultation with the SFC.
If any non-constituent of the Index is held in the portfolio, for reasons other than Index rebalancing and Index related corporate action, to enhance transparency the Manager will disclose the name and weighting of such non-constituent securities and other CIS on the Manager’s website immediately after the purchase and it will be reported daily until its disposal.
The Sub-Fund may conduct securities lending transactions, sale and repurchase transactions and/or reverse repurchase transactions in aggregate for up to 15% of its Net Asset Value.
Other than pursuing a representative sampling strategy during exceptional circumstances as disclosed above, the Manager does not intend to invest in FDIs for any purpose.
The universe of the Index comprises the constituents of the HSI, with exclusion policy applied. The constituents of the HSI must be securities of Greater China companies that are listed on the Main Board of the SEHK. Greater China companies refer to (i) companies incorporated in Hong Kong; (ii) mainland China companies (i.e. H-shares, Red-chips and P-chips companies); or (iii) companies with history, headquarters, management and/or a principal place of business in Hong Kong, Macau or mainland China. Foreign companies, stapled securities and biotech companies with stock names that end with marker “B” are excluded.
The exclusion policy of the Index will be based on ESG screenings applied from three dimensions:
(i) ESG risk ratings screening: ESG risk ratings from Sustainalytics (“ESG Risk Ratings”) measure the degree to which a company’s economic value (enterprise value) is at risk from financially material ESG factors. The ESG Risk Ratings build on a two-dimensional approach (starting with the “exposure” dimension reflecting the extent to which a company is exposed to material ESG risks, followed by the “management” dimension assessing how well the company manages its exposure to those risks) which are applied across the three building blocks (namely corporate governance, material ESG issues and idiosyncratic issues (being the occurrence of controversial/unexpected event)) upon which the overall ESG Risk Rating for a company is determined. The final rating outcome has been designed as a measure of unmanaged risk, in which the two dimensions of the ESG Risk Ratings, exposure and management are considered. Lower ESG Risk Ratings represent less unmanaged risk. The constituents in the HSI are ranked based on their ESG Risk Ratings in descending order (i.e. Rank 1 corresponds to the highest ESG risk). The 10 constituents in the HSI with the highest ESG risk according to the ESG Risk Ratings will be excluded from the Index, subject to the buffer zone rule. Please refer to the relevant Appendix in Part 2 of the Prospectus for more details on the ESG Risk Ratings.
(ii) United Nations Global Compact (‘UNGC’) principle screening: UNGC compliance ratings from three data providers, (the “UNGC Data Providers”) including Sustainalytics, ISS ESG and Arabesque S-Ray® are used. For each constituent in the HSI, it will be excluded from the Index if it meets the UNGC Data Providers’ non-compliance criteria for majority (i.e. >50%) of the UNGC Data Providers that cover the constituent. Please refer to the relevant Appendix in Part 2 of the Prospectus for more details on the UNGC non-compliance criteria.
(iii) Controversial product involvement screening: Based on the controversial product involvement data from Sustainalytics, a constituent in HSI will be excluded from the Index if it reaches any of the following thresholds of involvement:
- ≥5% of revenue for each of the following types of product involvement screening area: thermal coal extraction, thermal coal power generation, tobacco products production, tobacco products retail.
- any involvement for the following types of product involvement screening area: controversial weapon (tailor-made and essential), controversial weapon (non-tailor-made and non-essential)
The Index adopts a weighting methodology in which the remaining constituents of the HSI after the three screenings above are applied will be adjusted by their respective tilt factors that are determined based on the ESG Risk Ratings. Weights of constituents with lower (higher) ESG Risk Ratings are tilted to be given higher (lower) weights, subject to an 8% cap on individual constituent weight for each Index constituent.
The Index is a net total return index. A net total return index reflects the reinvestment of dividends or coupon payments, after deduction of any withholding tax (including surcharges for special levies, if applicable).
The Index was launched on 29 November 2021. As of 31 October 2022, the Index has a free-float adjusted total market capitalisation of HK$ 8.91 trillion and 63 constituents. As of 31 October 2022, 10 HSI constituents have been excluded from the Index after applying the relevant screening process. It is intended that the overall ESG Risk Rating of the Sub-Fund’s portfolio will achieve at least 20% improvement over that of HSI.
The Index is denominated in HKD and is calculated with a base value of 6000 as of 7 December 2018. It is calculated and disseminated real-time at 2-second intervals during trading hours of the SEHK. The Index is compiled and managed by Hang Seng Indexes Company Limited (“HSIL” or “Index Provider”), a wholly-owned subsidiary of Hang Seng Bank Limited. The Manager and its connected persons are independent of the Index Provider.
The constituents of the Index together with their respective weightings and additional information of the Index are published at the website of HSIL at www.hsi.com.hk/eng/indexes/all-indexes/hsiesgs. This website has not been reviewed by the SFC.
Bloomberg Index Code: HSIESGSN
Reuters Code: .HSIESGSN
|Stock Code||03039||Exchange Listing||Hong Kong Stock Exchange - Main Board|
|Fund Size (HKD)as of 31 Aug, 2023||595,569,490.91||Outstanding Units as of 31 Aug, 2023||208,400,000|
|Management fee||0.20% p.a*||Manager||E Fund Management (Hong Kong) Co., Limited|
|Fund Listing / Dealing Date||10 Oct, 2022||Exchange Listing||Hong Kong Stock Exchange - Main Board|
|Time Zone||GMT +08:00||Base Currency||HKD|
|Trading Currency||HKD||Bloomberg Ticker||03039 HK|
|ISIN Code||HK0000862711||Reuters Real Time Trading Code||03039.HK|
|Underlying Index||HSI ESG Enhanced Index (Total Return)||Type of Index||Total Return|
|Bloomberg Ticker||HSIESGSN||Stock Code||03039|