HSBC Highlights Growing Backlash Against ESG Strategies

HSBC Holdings Plc’s insights indicate a growing backlash against investment strategies that consider environmental, social, and governance (ESG) issues in the United States. The survey polled 310 professionals involved in ESG decision-making globally, representing $8.9 trillion in assets across 292 institutions. A rise in anti-ESG sentiment has been observed, particularly in the US, which they believe is largely politically driven and confined to the country.

This pushback is evident in North America, where fewer fund managers are prioritizing sustainability as an objective. Compared to the previous year, the number of respondents in North America who considered sustainability as a primary or secondary objective dropped from 37% to about 25%. Furthermore, approximately 44% of North American respondents stated that their reasons for having an ESG strategy had weakened in the past year.

Insights also highlighted a notable shift in how investors in the fixed-income market are incorporating ESG considerations into their portfolios. The use of ESG integration and labeled bonds has increased significantly compared to previous years, while negative screening and ESG ratings are declining as primary methods of ESG implementation. This indicates the progress among investors in developing more tailored approaches to ESG analysis.

The Republican party’s growing opposition to ESG practices is influencing investor sentiment in the US, particularly when it comes to bonds designed to support socially responsible initiatives. Republicans criticize ESG investing as part of a broader Democratic agenda that prioritizes climate change and societal issues over the interests of the fossil fuel industry.

HSBC itself faced controversy when it suspended its former head of responsible investing after he publicly criticized the finance industry’s excessive focus on climate change. Republicans’ increasing scrutiny and criticism of ESG practices are shaping the strategies of investors and fund managers alike.

HSBC aims to gain insights into investors’ current stances on specific ESG issues, identify emerging trends, and understand their future intentions regarding ESG considerations. The bank seeks to gauge the momentum behind ESG integration in the financial industry and its potential impact on investment decisions.