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Stock of the Week: HSBC

Better know your responsibility risks if you’re investing in banking

Andrew Willis 28 September, 2020 | 1:18AM
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First, it was allegations of aiding drug cartels, and now it’s accusations of helping Ponzi schemes… It hasn’t been a good look for HSBC (HSBC). But are the risks bad enough to sway investors – or institutions – away from wanting to buy the stock? Here’s what you should know.

The company still has management gaps, from risks related to the financing of fossil fuel companies to allegations of market rigging or involvement in tax evasion.

Sustainalytics says that HSBC has experienced a high level of controversies, which for an otherwise five-star rated company is disappointing. Most of these risks are manageable, and in a time when interest in responsible investing is picking up and investment funds increasingly screen out investments with too much ESG risk, it doesn’t make much sense to only manage some of the risks.

Still for all that, Sustainalytics pegs HSBC’s risk rating at around medium… Better than the overall banking industry, which has, on average, high unmanaged ESG risk. Other banks can also be worse off when it comes to other ESG issues like data privacy and security or financial resilience – ESG areas that HSBC excels at managing…

For Morningstar, I’m Andrew Willis.

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About Author

Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.


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