HSBC fund arm backs former Rosenberg Equities CEO in ESG startup

HSBC Asset Management, the fund arm of Britain’s biggest bank, said that it would take a minority stake RadiantESG. This is a women-led U.S.-based environmental, social and governance-focused asset management start-up

As a number of U.S. endowments and public pension schemes have pledged to invest more money, tis move came forward. This investment is with firms run by women or minorities. And that is in response to a long-standing criticism that the industry is not diverse enough. Set up by former Rosenberg Equities chief executive Heidi Ridley and former head of sustainable investing Kathryn McDonald, HSBC said that it would take up to a 33% stake in RadiantESG. And this will rebrand as RadiantESG Global Investors.

They have not released the financial details of this deal. RadiantESG intends to launch two strategies later in the year. In that one is a broad listed equity strategy. This focusses on global developed and emerging market stocks. And the second one is focused on planet-positive stocks. That contributes strongly to fulfilling the United Nations Sustainable Development Goals. Institutional and wealth management clients are targeted by both strategies.

McDonald along with Ridley had spent two decades at quant-driven investment house Rosenberg Equities, part of AXA Investment Managers. They said that while quant investing had many strengths, patchy ESG data from corporates meant the firm would not be able to rely on it completely. And added that they have to be honest with themselves that quant methodology is not sufficient, and they have to temper that with their own human judgement. HSBC manages $621 billion in assets. Ridley on tying up with HSBC would hopefully scale the firm quickly. It also enables it to capture a bigger slice of institutional money looking to allocate to women and minority-led businesses.

The Kresge Foundation, said in 2019 that, a quarter of its U.S. assets under management would be invested with female and diverse owned firms, by 2025. In recent years, a number of such firms are being launched. In that the majority are quite small, with an operating infrastructure. And this can make it harder for them to attract capital from larger institutions. Ridley said that they would rather give away part of the equity and partner with a firm that can help them meet those demands. So that they can really address some asset owner concerns about operational and going concern risk, such that they can hopefully accelerate their path to growth. Of the $69 trillion in assets in the United States, only 1.4% is managed by diverse-owned firms. This data has been shown from a 2020 study by the Diverse Asset Managers.

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