HSBC Launches AI-Powered ESG Risk Tracking Improvers Index

Asia centric Global banking group HSBC has launched a global Index that uses artificial intelligence (AI), to help measure the improvement of a company’s ESG credentials and their potential for positive financial performance.

Developed in conjunction with fintech firm Arabesque AI the new Index will track the performance of 1000-plus liquid stocks of global companies that are expected to benefit financially from improvements in their ESG risk.

“The HSBC ESG Risk Improvers Index enables investors to gain exposure to stocks exhibiting ESG momentum — a useful financial indicator of future performance,” said Patrick Kondarjian, global head of sustainability for markets and securities services at HSBC.

“This is in contrast to traditional ESG best-in-class, or ESG integration, investment approaches that purely target high ESG ratings – agnostic to whether the stock’s ESG credentials have recently improved or deteriorated,” Kondarjian added.

ESG Book, a leading provider of ESG data and analytics for public markets, and a member of the Arabesque Group, calculates the ESG score of each constituent of the Index by deploying AI, in the form of natural language processing, to mine relevant public sources daily, such as ESG-related news and NGO data.

The ESG score helps investors determine which companies may be better positioned to outperform the market over the long term.

The ESG momentum score is then computed by Arabesque AI every six months to determine whether each constituent has improved their ESG credentials. Investors will be able to invest in a range of products tracking the Index, allocating capital toward ESG improvers.