Hang Seng Investment Management has launched a new ETF in Hong Kong providing climate-tailored exposure to China’s onshore equity market.
The ETF provides broad exposure to China’s large-cap A-share equity market but with a notably reduced carbon emission profile.
The Hang Seng Stock Connect China A Low Carbon Index ETF has been listed on the Stock Exchange of Hong Kong in Hong Kong dollars (3038 HK) and Chinese renminbi (83038 HK).
The fund is linked to the Hang Seng Stock Connect China A Low Carbon Select Index which selects its constituents from the Hang Seng Stock Connect China A 300 Index, a universe comprising the 300 largest China A-share securities that are available for Northbound trading under the Stock Connect scheme.
The methodology first screens out violators of UN Global Compact principles as well as firms deriving significant revenue from controversial weapons, tobacco, or thermal coal.
The remaining constituents are initially weighted by float-adjusted market capitalization and then tilted to increase the weight of companies with relatively lower carbon emission profiles, and similarly lower the weight of companies with relatively higher carbon emission profiles.
The weighting process is subject to an active weight constraint of 0.2% and an absolute weight constraint of 10% for each constituent. The index is reviewed and rebalanced on a quarterly basis.
According to Hang Seng Indexes, the index delivers an approximate 30% reduction in overall carbon intensity compared to the parent universe.
As of the index’s latest rebalancing on 13 March, stocks from the financials and industrials sectors accounted for a third and a fifth of the total weight, respectively, followed by stocks from the consumer staples (14.7%), information technology (9.5%), and health care (8.5%) sectors.
Notable positions included Kweichow Moutai (5.6%), Contemporary Amperex Technology Industrials (2.9%), China Merchants Bank (2.5%), Ping An Insurance (2.5%), and Wuliangye Yibin (2.0%).
The ETF comes with a management fee of 0.18% and estimated ongoing charges over a year of 0.35%.