UBS Asset Management launches its first Climate Aware ETF

UBS Asset Management (UBS AM) today launched its first Climate Aware exchange traded fund (ETF). The UBS ETF (IE) UBS Climate Aware Global Developed Equity CTB UCITS ETF mirrors the firm’s Climate Aware framework in an ETF wrapper and is intended for investors who require global developed market large and mid-cap equity exposure with a strong climate profile.

The fund tracks the Solactive UBS Climate Aware Global Developed Equity CTB Index, which is an index designed to mimic UBS AM’s Climate Aware framework and the tilt holdings towards companies with best-in-class climate score while excluding laggards.

To arrive at the climate score, the index methodology considers key risks and opportunities related to climate change, such as a company’s carbon emissions, if it’s involved in coal energy or has fossil fuel reserves, or if it generates renewable energy. Other elements, such as the glide path probability and physical risk are also taken into consideration.

With the climate score defined, industry leaders are then overweighted and laggards, those in the bottom 30%, are excluded. The index methodology also filters out companies involved in tobacco, controversial and military weapons, firms with United Nations Global Compact violations and companies exposed to production and energy generation of thermal coal and oil sands.

The Solactive UBS Climate Aware Global Developed Equity CTB Index fulfills the EU Climate Transition Benchmark minimum requirements and achieves a substantial ESG improvement, with a limited potential temperature increase of 1.8°C by 2050, compared to 2.8°C estimated for the parent benchmark. This is achieved through a 41% reduction in carbon intensity¹ and a reduction of potential future emissions² of 92% relative to its parent index. At the same time, the portfolio increases the green share of power generation output by almost 50%. The ETF is classified as an Article 9 product under the EU's Sustainable Finance Disclosure Regulation (SFDR).

As is customary for UBS AM’s Climate Aware suite of products, the firm will apply its engagement strategy and active voting policy to the ETF holdings, advocating clear climate-friendly principles to support investee companies in developing new technologies needed and suited for the transition to a low carbon economy.

¹ relative emission exposure in tons CO₂ per EUR 1M revenues.
² In kilotons CO₂ as per ISS ESG research data.

Barry Gill, Head of Investments, UBS Asset Management, said: “Investors are growing more aware of the effects climate is having on their portfolios. By providing innovative products, such as the Climate Aware ETF, we can enable clients to align their investments with their de-carbonization goals. Our Climate Aware approach is underpinned by our active stewardship program. With a consistent methodology, and growing the pool of assets invested using this framework, we can drive further positive change on behalf of our clients.”

Timo Pfeiffer, Chief Markets Officer at Solactive, commented: “Climate-aware investing is one of investors' most significant criteria when choosing their investments, and, through political and public initiatives, its importance will grow steadily. With UBS's new Climate Aware ETF, investors obtain an effective tool to meet their climate and decarbonization goals. With its 1.8°C degrees target, the ETF operates under the 2°C degree threshold, making it not only future-proof but also a viable investment opportunity contributing to a greener future. We are very happy to be chosen as UBS's index provider for this ETF.”

The UBS Climate Aware Global Developed Equity CTB UCITS ETF is primarily available in a USD share class. Listings will be across key European exchanges, including the Xetra, Borsa Italiana and SIX Swiss Exchange.

Asset Management is a large-scale asset manager with a presence in 23 markets. It offers investment capabilities and investment styles across all major traditional and alternative asset classes to institutions, wholesale intermediaries and wealth management clients around the world. It is a leading fund house in Europe, the largest mutual fund manager in Switzerland, the second largest fund of hedge funds manager and one of the largest real assets investment managers in the world.

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