UBS Asset Management has expanded its range of sustainability-themed ETFs with the launch of three new ETFs in Europe.
Clemens Reuter, Head of ETF & Passive Investment Specialists, UBS.
Consisting of two equity funds and one fixed income fund, these latest additions deliver core, broad market exposure while integrating environmental, social, and governance (ESG) considerations into their construction processes.
UBS has harnessed the indexing capabilities of Stoxx, MSCI, and JP Morgan combined with the ESG insight of Sustainalytics and MSCI ESG Research.
The funds are the UBS ETF (LU) Euro Stoxx 50 ESG UCITS ETF, providing exposure to blue-chip eurozone stocks; the UBS ETF (LU) MSCI China ESG Universal UCITS ETF, targeting Chinese equity exposure across the full spectrum of share types; and the UBS ETF (LU) JP Morgan USD EM IG ESG Diversified Bond UCITS ETF, which invests in US dollar-denominated emerging market debt.
They have been listed on London Stock Exchange and Xetra, and are expected to be rolled out across Borsa Italiana and SIX Swiss Exchange later this month. The funds are available in USD as well as currency-hedged (CHF, EUR, and GBP) share classes.
Clemens Reuter, Head of ETF & Passive Investment Specialists, UBS Asset Management said, “Being a leader and innovator in sustainability-focused ETFs, UBS Asset Management has now further expanded into new markets and segments, widening considerably the ESG investment opportunities for investors.
“The demand for sustainable investments is accelerating, and it is of great importance to us to help investors in achieving their ESG goals, whilst being invested across geographies and diversified across asset classes. This newly launched series of three ETFs certainly opens a new set of opportunities for passive sustainability-focused investors.”
Michael Baldinger, Head of Sustainable & Impact Investing, UBS Asset Management, added, “UBS’s goal is to be the world’s leading sustainable financial provider, and we aim to reach that by developing innovative products and solutions to meet the evolving needs of our clients.”
Eurozone blue-chips
The UBS ETF (LU) Euro Stoxx 50 ESG UCITS ETF is linked to the Euro Stoxx 50 ESG Index, a sustainability-screened version of the widely followed Euro Stoxx 50.
The methodology utilizes data from Sustainalytics to remove five firms from the parent index that have the lowest ESG scores. It also omits non-UN Global Compact Principle-compliant companies and tobacco producers, controversial weapon producers, and those involved in thermal coal. Each company that is removed is then replaced by a sector peer with the highest ESG score from the wider Euro Stoxx universe.
Similar to its parent index, the Euro Stoxx 50 ESG Index is weighted by free-float market capitalization. With an expected low tracking error relative to the Euro Stoxx 50, the ETF is marketed as a core, ESG-acceptable building block for eurozone blue-chip stocks.
The fund comes with an expense ratio of 0.15%, which is 10 basis points more expensive than the lowest-cost conventional Euro Stoxx 50 ETFs.
China broad market
The UBS ETF (LU) MSCI China ESG Universal UCITS ETF physically replicates the MSCI China ESG Universal Index.
The index is based on the MSCI China Index, a representation of China H shares, B shares, Red chips, P chips, foreign listings, and large-cap A shares (currently accounted for at 10% of their market capitalization).
The methodology firstly excludes stocks with the weakest ESG profiles as well as those involved in certain prohibited industries or embroiled in ESG controversies. The remaining constituents are then assigned an ESG factor score that reflects the firm’s current ESG profile as well as its trend in improving that profile. Securities are weighted based on a blend of free-float market cap and ESG factor score.
The fund comes with an expense ratio of 0.65%, which is broadly in line with mainstream MSCI China ETFs.
Emerging market debt
The UBS ETF (LU) JP Morgan USD EM IG ESG Diversified Bond UCITS ETF tracks the JP Morgan USD EM IG ESG Diversified Bond Index.
The index universe consists of sovereign, quasi-sovereign, and corporate debt from emerging market issuers. Bonds can be fixed-rate or floating-rate but must be denominated in US dollars and rated investment grade to be eligible for inclusion.
The methodology applies an ESG screening process to remove issuers with poor ESG performance. Bonds are weighted by market value and country exposure is capped at 5%.
The fund comes with an expense ratio of 0.45%. This is highly competitive considering non-ESG equivalents come in at 0.50%.