HSBC Global Emerging Markets ESG Bond

The sub-fund aims to provide long term total return by investing in a portfolio of Investment Grade and Non-Investment Grade rated fixed income (e.g. bonds) and other similar securities either issued by issuers which have their registered office in Emerging Markets around the world or which are issued or guaranteed by governments, government agencies, quasi government entities, state sponsored enterprises, local or regional governments (including state, provincial, and municipal governments and governmental entities) and supranational bodies of Emerging Markets, while promoting ESG characteristics within the meaning of Article 8 of SFDR. Securities will be primarily denominated in US Dollar. The sub-fund invests in normal market conditions a minimum of 80% of its net assets in Investment Grade and Non-Investment Grade rated fixed income and other similar securities issued by issuers meeting certain ESG score and lower carbon intensity criteria (“ESG and Lower Carbon Criteria”). ESG and Lower Carbon Criteria, which together with fundamental qualitative issuer analysis, are used to determine the sub fund’s investible universe, may include, but are not limited to:  including issuers following good ESG practices. Good ESG practices include, but are not limited to, issuers with efficient electricity and water usage, issuers with sound business ethics and transparency and a countries’ use of renewable energy as recorded by the Sustainable Accounting Standards Board.  including sustainable bonds such as, but not limited to, Sustainability-Linked Bonds, Transition Bonds, Social Bonds and Green Bonds. Such bonds are not subject to the aforementioned exclusions. Issuers considered for inclusion within the sub-fund’s portfolio will be subject to Excluded Activities in accordance with HSBC Asset Management’s Responsible Investment Policies, which may change from time to time. More information is provided in section 1.5. “Integration of sustainability risks into investment decisions and SFDR principles” sub-section HSBC Asset Management Responsible Investment Policies. In addition, issuers involved in activities referred to in Article 12(1)(a) to (g) of CDR (EU) 2020/1818 will not be considered for inclusion in the portfolio. The ESG and Lower Carbon Criteria are proprietary to HSBC, subject to ongoing research and may change over time as new criteria are identified. The exclusion or inclusion of an issuer in the sub-fund’s investment universe is at the discretion of the Investment Adviser. Issuers with an improving ESG score and carbon intensity may be included when their ESG score is still low or carbon intensity is still high. ESG and Lower Carbon Criteria, Excluded Activities and the need for enhanced due diligence may be identified and analysed by using, but not exclusively, HSBC’s Proprietary ESG Materiality Framework and ratings, fundamental qualitative research and corporate engagement. When assessing issuers’ ESG score and/or rating, Lower Carbon Criteria or their involvement in Excluded Activities, the Investment Adviser may rely on expertise, research and information provided by financial and non financial data providers. The sub-fund may invest more than 10% and up to 30% of its net assets in securities issued by or guaranteed by a single sovereign issuer with a Non-Investment Grade credit rating. This is due to the fact that JP Morgan ESG EMBI Global Diversified (the “Reference Benchmark”) may contain sovereign issuers that may have a Non-Investment Grade rating. The Investment Adviser may decide to invest in a specific Non-Investment Grade sovereign issuer and/or to overweight (in relation to the Reference Benchmark) a particular Non-Investment grade sovereign issuer. The Non-Investment Grade sovereign issuers that the sub-fund may invest up to 30% of its net assets in may change at any time as a result of: changes in credit ratings, changes in the Reference Benchmark weights, the Investment Adviser's decision to allocate a higher or lower proportion of the sub-fund's net assets to a particular benchmark constituent and/or market movements. Investment in onshore Chinese fixed income securities include, but are not limited to, onshore fixed income securities denominated in RMB, issued within the People’s Republic of China (“PRC”) and traded on the China Interbank Bond Market (“CIBM”). The sub-fund may invest in the CIBM either through Bond Connect and/or the CIBM Initiative. The sub-fund may invest up to 10% of its net assets in onshore Chinese bonds issued by, amongst other, municipal and local governments, companies and policy banks. The sub-fund may invest up to 10% of its net assets in convertible bonds (excluding contingent convertible securities). The sub-fund may invest up to 15% of its net assets in contingent convertible securities. The sub-fund may hold equity securities (including but not limited to warrants, common stock and preferred stock) received as a result of or in connection with a corporate action (including but not limited to bankruptcy or restructuring) affecting existing portfolio holdings. The sub-fund may also invest in bank deposits, money market instruments or money market funds for treasury purposes. The sub-fund may use financial derivative instruments for hedging purposes. The sub-fund may also use, but not extensively, financial derivative instruments for investment and efficient portfolio management purposes. The financial derivative instruments the sub-fund is permitted to use include, but are not limited to, futures, options, swaps (such as credit default swaps and Total Return Swaps) and foreign exchange forwards (including non-deliverable forwards). Financial derivative instruments may also be embedded in other instruments in which the sub-fund may invest. The sub-fund is actively managed and does not track a benchmark. The Reference Benchmark is used for market comparison purposes. The Investment Adviser will use its discretion to invest in securities not included in the Reference Benchmark based on active investment management strategies and specific investment opportunities. It is foreseen that a significant percentage of the sub fund's investments will be components of the Reference Benchmark. However, their weightings may deviate materially from those of the Reference Benchmark. The deviation of the sub-fund’s performance relative to the reference benchmark is monitored, but not constrained, to a defined range.