Financial services company UBS Asset Management is introducing Exchange-Traded Funds (ETFs) tied to low-carbon market indices.
UBS Launches ESG-Focused Low Carbon Select UCITS ETFs
UBS Asset Management (UBS AM) has introduced a new family of Exchange-Traded Funds (ETFs) under the UBS MSCI ESG Universal Low Carbon Select UCITS ETFs umbrella. These ETFs are designed to replicate MSCI ESG Universal Low Carbon Select indices, which focus on large and mid-cap equities with strong Environmental, Social, and Governance (ESG) scores and low carbon exposure.
Composition and Focus
The ETFs track MSCI ESG Universal Low Carbon Select indices, which exclude companies based on ESG criteria and carbon intensity, while favouring firms with strong ESG scores and lower carbon footprints. These indices overweight companies demonstrating a solid ESG profile and a trend of improving ESG practices. The strategy includes physical full replication of the underlying index, meaning the ETFs purchase all or substantially all constituents of the index.
For instance, the UBS MSCI China ESG Universal Low Carbon Select UCITS ETF invests in Chinese large and mid-cap stocks with ESG and low-carbon considerations.
Exclusion Criteria
The indices exclude companies lacking strong ESG practices or involved in controversial sectors. The "Low Carbon Select" label suggests specific screening to exclude or underweight firms with high carbon emissions, thereby reducing the carbon intensity of the portfolio relative to the broader market. A 5% issuer cap limits concentration risk by capping the weight of any single issuer in the index.
Weighting Scheme
The weighting methodology adjusts component weights based on their ESG scores and carbon footprint. Companies with better ESG ratings and positive ESG improvement trends receive higher weights. Concentration of any single issuer is capped at 5%, implying a diversified exposure across eligible equities.
Regional and Share Class Variants
UBS offers these ETFs with regional focuses, such as the MSCI China ESG Universal Low Carbon Select UCITS ETF (USD), as one example. These ETFs come in various share classes differentiated by currency (USD, EUR) and distribution policies (distributing or accumulating dividends). For the China UCITS ETF, the ETF distributes dividends semiannually and has domicile in Luxembourg.
Upcoming Plans
UBS AM will adjust the benchmark of the existing UBS ETF (IE) MSCI ACWI ESG Universal ETF to reflect the new methodology. Another share class focusing on emerging markets is planned to follow in the coming months. However, no specific new launches or modifications were found in the latest data.
Additional Notes
The total expense ratio (TER) for these ETFs is generally around 0.30% per annum. The ETFs are UCITS compliant, domiciled mainly in Luxembourg, and suitable for investors seeking ESG and climate-conscious equity exposure in a diversified single-fund structure.
In summary, the UBS MSCI ESG Universal Low Carbon Select UCITS ETFs invest in diversified equities with low carbon emissions and strong ESG profiles, apply issuer caps and exclusion criteria to enhance sustainability, and are available in various regional share classes, mainly USD and EUR, with physically replicated portfolios distributing dividends typically on a semiannual basis. These ETFs will be listed on Xetra, Borsa Italiana, Six Swiss Exchange, and other exchanges.
The ETFs under UBS MSCI ESG Universal Low Carbon Select UCITS ETFs umbrella not only focus on investing in low carbon equities but also consider strong Environmental, Social, and Governance (ESG) scores. These ETFs, such as the UBS MSCI China ESG Universal Low Carbon Select UCITS ETF, are financed through various share classes, primarily in USD and EUR, and aim to provide technology-driven investment solutions by using innovative strategies like physical full replication and smart weighting based on ESG scores and carbon footprint.
%20tied%20to%20low-carbon%20market%20indices.){kind=link}