Investment firm UBS Asset Management introduces Exchange-Traded Funds (ETFs) based on low-carbon index portfolios.

Investment firm UBS Asset Management introduces Exchange-Traded Funds (ETFs) based on low-carbon index portfolios.

In a move towards sustainable and low-carbon investing, UBS Asset Management (UBS AM) has introduced a series of new exchange-traded funds (ETFs) under the UBS MSCI ESG Universal Low Carbon Select UCITS ETFs umbrella. These ETFs are designed to track MSCI ESG Low Carbon Select indices, with a regional focus depending on the specific ETF.

Composition

The UBS MSCI China ESG Universal Low Carbon Select UCITS ETF primarily focuses on Chinese equities, with a significant weight towards the Non-Consumer Staples, Financial Services, Telecommunications, and Technology sectors. The UBS MSCI Australia Universal UCITS ETF, on the other hand, targets Australian equities, with a strong representation in Financial Services, Non-Consumer Staples, and Materials sectors.

Carbon Footprint

These ETFs employ MSCI's Low Carbon Select Indices, which reduce carbon intensity and fossil fuel exposure relative to the parent index. This is achieved through issuer-level caps, exclusion of certain sectors, and ESG factor screening, resulting in a lower carbon footprint compared to the broad market MSCI parent indices.

Regional Focus

The regional focus varies by the specific ETF variant, with options including China-centric, Australia-centric, emerging markets coverage, and global coverage across developed and emerging markets.

Differences from Parent MSCI Indices

The UBS MSCI ESG Universal Low Carbon Select UCITS ETFs exclude companies that do not meet MSCI's ESG criteria and those with higher carbon emissions, thus reducing exposure to controversial sectors like fossil fuels. They also use a 5% issuer cap to limit concentration risk in large companies, which is not typical in parent MSCI indices. The composition differs by reducing weight in carbon-intensive sectors and overweighting companies with strong ESG metrics.

Availability and Weighting

The UBS MSCI ESG Universal Low Carbon Select UCITS ETFs are available in four share classes and will be listed on various exchanges. The weighting of companies in the ETFs is based on a combination of factors including market capitalization, ESG rating, and ESG trend.

UBS AM has launched these ETFs in collaboration with MSCI, with the aim of improving the carbon footprint compared to the respective parent index. The new ETFs exclude companies involved in nuclear weapons, civilian firearms, tobacco, thermal coal, fossil fuel extraction, and the top 5% of companies with the highest carbon emissions. They are aimed at investors seeking low carbon and improved ESG investments.

[1] Source: UBS Asset Management [2] Source: UBS Asset Management [4] Source: UBS Asset Management [5] Source: UBS Asset Management

1. In the UBS MSCI Australia Universal UCITS ETF, there is a strong representation of the Financial Services, Non-Consumer Staples, and Materials sectors, indicating a significant focus on investing in these areas while using technology to manage these funds.
2. To further diversify their portfolio and reduce carbon footprint, investors seeking improved ESG investments and low carbon investing may consider the UBS MSCI China ESG Universal Low Carbon Select UCITS ETF, which excludes companies involved in controversial technology like nuclear weapons and fossil fuel extraction.

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