image 1 – Sculpture from the G7 Summit held in Lyon, France
The 47th G7 Summit was held during the second weekend of June in the United Kingdom. “G7” is an acronym for the Group of Seven, an inter-governmental political forum that consists of the UK (currently holding presidency), US, Canada, France, Germany, Italy and Japan. Together, these countries represent more than 40% of global GDP and approximately 10% of the world’s population1.
The G7 emerged in the 1970s as an informal gathering of finance ministers from Western Europe and North America, who came together to form agreements and approaches to important global issues. Over the years, the membership has expanded and shifted to include the world’s largest advanced economies and wealthiest liberal democracies.
Along with representatives from the European Union and observers from other leading economies, the G7 meets at annual summits hosted by the nation occupying the annually-rotating presidency.
Over the past decade, key topics of discussion at the summits include:
image 1 – Sculpture from the G7 Summit held in Lyon, France
During the 2021 G7 Summit, the leaders had one objective to help the world combat and build back better from the coronavirus and to create a greener, more prosperous future.
Image 2 – Aerial view of Carbis Bay, St Ives, Cornwall, UK (site of the 2021 G7 summit)
Many measures were discussed to address the climate crisis and protect nature with leaders reaffirming their commitment to the Paris Agreement, including policies around phasing out coal burning, reducing emissions from energy, transport, heavy industry and investing in carbon capture technology.
One significant outcome was the ‘Build Back Better for the World’ partnership proposed by the US. This aims to bring together G7 countries to provide financing for vital infrastructure – from railways in Africa to wind farms in Asia. The initiative is intended to give developing countries access to more, better and faster finance, while accelerating the global shift to renewable energy and sustainable technology.
1.“G7 summit: What is it and why is it in Cornwall?”, BBC.co.uk
With climate change penetrating through all levels of society, there is an increasing demand from investors and regulators for companies to consider the environmental impact on their businesses. This is commonly done via company disclosures and reporting that may influence investors’ confidence2. Since 2003, the number of companies providing climate-related disclosures have grown by more than 40x (see Figure 1).
The G7 also backed proposals on company disclosures of exposure to climate-related risks, a measure seen as vital to safeguard the financial system from climate change shocks. In June, the G7 Finance Ministers also called on more unified efforts to:
These recommendations are in line with the Task Force on Climate-related Financial Disclosures (TCFD), a robust global framework for climate-related financial disclosure.
TCFD-aligned disclosures offer investors specific information on a company’s climate risks, corporate governance and accountability. For the company itself, they also provide a mechanism to integrate climate risks into risk management and business strategy. As such, investors are provided with the transparency they need to evaluate the relevant climate risks and opportunities.
More than 1,500 companies today support the TCFD’s recommendations, including corporates with a combined market cap of USD13 trillion and investors with USD140 trillion of assets under management collectively. As of Nov 2020, the UK was the first major economy to confirm plans to mandate climate disclosure.
In addition, the G7 Finance Ministers also backed the International Financial Reporting Standards Foundation to develop a new global standard for sustainability reporting. They also endorsed the launch of the Taskforce on Nature-related Financial Disclosures, which is a new global market-led initiative aimed to provide financial institutions and corporates with a complete picture of their environmental risks and opportunities.
2. “Corporate reporting and climate change”, Deloitte.com
Climate-related risks affecting companies have the potential to result in financial impact just as other forms of risk do, such as market risk, reputational risk, and regulatory risk. Investors are beginning to use company disclosures on climate-risk (such as those made in line with TCFD) to identify, measure, and mitigate risk in their own investment portfolios.
The TCFD separates climate risk into two categories: physical and transition risks. The categories and severity levels of these risks are described in the table3 below:
ESG disclosure: data released by companies on operations and business impact in three areas: environmental, social and corporate governance; such information can aid investors to screen companies with greater financial risk from existing ESG practices
Group of Seven (G7): an inter-governmental political forum that consists of the UK (currently holding presidency), US, Canada, France, Germany, Italy and Japan.
Task Force on Climate-related Financial Disclosures (TCFD): a robust global framework for effective climate-related financial disclosures; aim of the disclosures is to promote more informed investment decisions and enable a better understanding of carbon-related assets in the financial sector and system’s exposures to climate-related risks.
3. “Clarity in financial reporting: Disclosure of climate-related risks”, Deloitte
This document is prepared by The Hongkong and Shanghai Banking Corporation Limited (‘HBAP’), 1 Queen’s Road Central, Hong Kong. HBAP is incorporated in Hong Kong and is part of the HSBC Group. This document is distributed and/or made available by HSBC Bank Canada (including one or more of its subsidiaries HSBC Investment Funds (Canada) Inc. (“HIFC”), HSBC Private Investment Counsel (Canada) Inc. (“HPIC”) and HSBC InvestDirect division of HSBC Securities (Canada) Inc. (“HIDC”)), HSBC Bank (China) Company Limited, HSBC Continental Europe, HBAP, HSBC Bank (Singapore) Limited, HSBC Bank Middle East Limited (UAE), HSBC UK Bank Plc, HSBC Bank Malaysia Berhad (127776-V)/HSBC Amanah Malaysia Berhad (807705-X), HSBC Bank (Taiwan) Limited, HSBC Bank plc, Jersey Branch, HSBC Bank plc, Guernsey Branch, HSBC Bank plc in the Isle of Man, HSBC Continental Europe, Greece, The Hongkong and Shanghai Banking Corporation Limited, India (HSBC India), HSBC Bank (Vietnam) Limited, PT Bank HSBC Indonesia (HBID) and HSBC Bank (Uruguay) S.A. (HSBC Uruguay is authorised and oversought by Banco Central del Uruguay), (collectively, the “Distributors”) to their respective clients. This document is for general circulation and information purposes only.
The contents of this document may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose. This document must not be distributed in any jurisdiction where its distribution is unlawful. All non-authorised reproduction or use of this document will be the responsibility of the user and may lead to legal proceedings. The material contained in this document is for general information purposes only and does not constitute investment research or advice or a recommendation to buy or sell investments. Some of the statements contained in this document may be considered forward looking statements which provide current expectations or forecasts of future events. Such forward looking statements are not guarantees of future performance or events and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a result of various factors. HBAP and the Distributors do not undertake any obligation to update the forward-looking statements contained herein, or to update the reasons why actual results could differ from those projected in the forward-looking statements. This document has no contractual value and is not by any means intended as a solicitation, nor a recommendation for the purchase or sale of any financial instrument in any jurisdiction in which such an offer is not lawful. The views and opinions expressed are based on the HSBC Global Investment Committee at the time of preparation, and are subject to change at any time. These views may not necessarily indicate HSBC Asset Management‘s current portfolios’ composition. Individual portfolios managed by HSBC Asset Management primarily reflect individual clients’ objectives, risk preferences, time horizon, and market liquidity.
The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested. Past performance contained in this document is not a reliable indicator of future performance whilst any forecasts, projections and simulations contained herein should not be relied upon as an indication of future results. Where overseas investments are held the rate of currency exchange may cause the value of such investments to go down as well as up. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets. Economies in emerging markets generally are heavily dependent upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be affected adversely by economic conditions in the countries in which they trade. Investments are subject to market risks, read all investment related documents carefully.
This document provides a high level overview of the recent economic environment and has been prepared for information purposes only. The views presented are those of HBAP and are based on HBAP’s global views and may not necessarily align with the distributors’ local views. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. It is not intended to provide and should not be relied on for accounting, legal or tax advice. Before you make any investment decision, you may wish to consult a financial adviser. In the event that you choose not to seek advice from a financial adviser, you should carefully consider whether the investment product is suitable for you. You are advised to obtain appropriate professional advice where necessary.
We accept no responsibility for the accuracy and/or completeness of any third party information obtained from sources we believe to be reliable but which have not been independently verified.
Important Information about HSBC Global Asset Management (Canada) Limited (“AMCA”)
HSBC Asset Management is a group of companies, including AMCA, that are engaged in investment advisory and fund management activities, which are ultimately owned by HSBC Holdings plc. AMCA is a wholly owned subsidiary of, but separate entity from, HSBC Bank Canada.
Important Information about HSBC Investment Funds (Canada) Inc. (“HIFC”)
HIFC is the principal distributor of the HSBC Mutual Funds and offers the HSBC Mutual Funds and/or the HSBC Pooled Funds through the HSBC World Selection® Portfolio service. HIFC is a subsidiary of AMCA, and indirect subsidiary of HSBC Bank Canada, and provides its products and services in all provinces of Canada except Prince Edward Island. Mutual fund investments are subject to risks. Please read the Fund Facts before investing.
®World Selection is a registered trademark of HSBC Group Management Services Limited.
Important Information about HSBC Private Investment Counsel (Canada) Inc. (“HPIC”)
HPIC is a direct subsidiary of HSBC Bank Canada and provides services in all provinces of Canada except Prince Edward Island. The Private Investment Counsel service is a discretionary portfolio management service offered by HPIC. Under this discretionary service, assets of participating clients will be invested by HPIC or its delegated portfolio manager, AMCA, in securities, including but not limited to, stocks, bonds, mutual funds, pooled funds and derivatives. The value of an investment in or purchased as part of the Private Investment Counsel service may change frequently and past performance may not be repeated.
Important Information about HSBC InvestDirect (“HIDC”)
HIDC is a division of HSBC Securities (Canada) Inc., a direct subsidiary of, but separate entity from, HSBC Bank Canada. HIDC is an order execution only service. HIDC will not conduct suitability assessments of client account holdings or of the orders submitted by clients or from anyone authorized to trade on the client’s behalf. Clients have the sole responsibility for their investment decisions and securities transactions.
The following statement is only applicable to HSBC Bank (Taiwan) Limited with regard to how the publication is distributed to its customers: HSBC Bank (Taiwan) Limited (“the Bank”) shall fulfill the fiduciary duty act as a reasonable person once in exercising offering/conducting ordinary care in offering trust services/ business. However, the Bank disclaims any guaranty on the management or operation performance of the trust business.
THE CONTENTS OF THIS DOCUMENT HAVE NOT BEEN REVIEWED BY ANY REGULATORY AUTHORITY IN HONG KONG OR ANY OTHER JURISDICTION.
YOU ARE ADVISED TO EXERCISE CAUTION IN RELATION TO THE INVESTMENT AND THIS DOCUMENT OR VIDEO. IF YOU ARE IN DOUBT ABOUT ANY OF THE CONTENTS OF THIS DOCUMENT OR VIDEO, YOU SHOULD OBTAIN INDEPENDENT PROFESSIONAL ADVICE.
© Copyright 2021. The Hongkong and Shanghai Banking Corporation Limited, ALL RIGHTS RESERVED.
No part of this document may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited.