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UBS ETF (LU) Bloomberg MSCI Global Liquid Corporates Sustainable UCITS ETF (hedged to EUR) A-acc
Asset Class: Fixed Income
No sustainable investment objective
- It promotes Environmental/Social (E/S) characteristics and while it does not have as its objective a sustainable investment, it will have a minimum proportion of 10% of sustainable investments with an environmental objective in economic activities that do not qualify as environmentally sustainable under the EU Taxonomy
- This financial product is passively managed and tracks an Index, indicators for adverse impacts on sustainability factors are taken into account by the Index provider as appropriate to the Index family.
- Indicators for adverse impacts on sustainability factors are taken into account by the Index provider as appropriate to the Index family.
- The indices incorporate the MSCI ESG Controversies score, screening out on a timely basis any issuers in significant breach of ESG norms.
- MSCI ESG Controversies are designed to provide timely and consistent assessments of ESG controversies involving issuers. Any issuer with a “Red” MSCI ESG Controversies Score (score less than 1) is excluded from Sustainability indices. The Controversy Score measures an issuer’s involvement in major ESG controversies and how well the issuer adheres to international norms and principles.
- The financial product exclude investments in companies involved directly in the use, development, manufacturing, stockpiling, transfer or trade of cluster munitions and/or anti-personnel landmines, nuclear weapons, biological weapons or chemical weapons.
- The MSCI ESG Controversies tool monitors company involvement in notable ESG controversies related to the company’s operations and/or products, possible breaches of international norms and principles such as the UN Global Compact, and performance with respect to these norms and principles.
Environmental or social characteristics of the financial product
- The following characteristics are promoted by the financial product:
- tracks/tracking of a benchmark with a sustainability profile (ESG Score) that is higher than the parent benchmark’s sustainability profile The Reference Benchmark designated for the purpose of attaining the characteristic promoted by the financial product is the Bloomberg MSCI Global Liquid Corporates Sustainable Bond Index.
- The characteristic(s) is/are measured using the following indicator(s) respectively:
- The ESG Score
- This financial product seeks to promote the characteristic(s) described in this annex through Index selection and passive asset management.
- This financial product is passively managed and seeks to track the performance and the ESG profile of the Index. Sustainability characteristics and risks are considered as part of the Index selection process. The Index which is stated by the index provider to be screened against environmental, social or governance criteria and any methodology used by the index provider to assess sustainability characteristics and risks of the constituents of the index can be found on the website of the index provider.
- The following binding element(s) of the investment strategy are used to select the investments to attain the characteristic(s) promoted by this financial product: Characteristic:
- A sustainability profile (MSCI ESG Score) that is higher than the parent benchmark’s sustainability profile. The calculations do not take account of cash, derivatives and unrated investment instruments.
- The binding element(s) are calculated at quarter end using the average of all of business days’ values in the quarter.
- Assessment of good governance practices of the investee companies are performed by the index provider.
- MSCI ESG Ratings analysis begins with an evaluation of each company’s Corporate Governance, taking into consideration the company’s ownership and control structures, the composition and effectiveness of its board, the effectiveness of its incentive practices and the integrity of its accounting. Corporate Behavior is also monitored, including any controversies that might have a significant negative impact on the company’s value.
Proportion of investments
The minimum proportion of the investments used to meet the environmental and/or social characteristics promoted by the financial product is 90%.The minimum proportion of sustainable investments of the financial product is 10%. Derivatives are not used for the attainment of the characteristics promoted by this financial product. Derivatives will be primarily used for hedging and liquidity management purposes.
The methodology of the construction of the Index can be found in the annex to the prospectus or supplement.
Due diligence is carried out on index providers and/or data providers. This financial product is passively managed and seeks to track the performance and the ESG profile of the Index. Sustainability characteristics and risks are considered as part of the Index selection process.
- In terms of passive strategies tracking sustainability indexes as is the case with this financial product, the engagement process helps us to identify companies where material ESG and sustainability factors may present a future negative risk.
- While the UBS AM engagement program is across all asset classes and portfolios, the impact on passively managed fixed income strategies might be reduced, mainly due to the lack of voting rights and that companies which failed in UBS AM's engagement process are typically not excluded due to the passive management style.
- Nevertheless, passively managed fixed income assets are part of the engagement with senior management, as all other assets the firm manages, in order to achieve the biggest possible impact.
Data sources and processing
- The data sources used to attain the stated environmental or social characteristics are as follows:
- The MSCI ESG Score, supplied by the index provider
- Data is consumed from leading provider(s)
Limitations to methodologies and data
We apply a minimum coverage threshold for the data sources used to attain the stated environmental or social characteristics of the financial product, these thresholds ensure that the binding targets can be monitored and measured. Accuracy of data is dependent on 3rd party providers, coverage of data sources can be less than 100% due to uncovered asset types, incomplete or inconsistent data and gaps in the coverage of these 3rd party providers.
Designated reference benchmark
- The financial product has initially selected the reference benchmark for its relevance to its investment strategy and the attainment of the sustainable objective it seeks to achieve. The Index rebalances on a monthly basis, more details on the index methodology applied by the Index provider can be found below. It is not anticipated that the composition of the Index will be adjusted to the extent that tracking is not possible.
- The alignment of the investment strategy with the methodology of the index is ensured on a continuous basis as the index provider rebalances the index on a regular basis and the Investment Manager tracks the Index in line with the limits set out in the investment policy of Fund.
- The financial product has initially selected the reference benchmark for its relevance to its investment strategy and the attainment of the characteristics it seeks to promote.
- The investment strategy of the fund is to track the benchmark’s return and its characteristics, including ESG characteristics, as closely as reasonably possible. The investment strategy is to replicate the index by applying stratified sampling managing the tracking error.
- The investment manager reviews the index methodology when the product is set up and the Index provider may be contacted if the Index methodology is no longer in line with the investment strategy of the financial product.
- "The Bloomberg MSCI Global Liquid Corporates Sustainable Bond Index tracks the performance of US, Euro Area, UK, and Canada local currency fixed-rate, investment grade corporate debt. The index applies additional liquidity criteria to securities from each of the four markets based on minimum amount outstanding and time from issuance. The index includes issuers with MSCI ESG Ratings of BBB or higher and excludes issuers that are involved in business activities that are restricted according to pre-defined Business Involvement Screens and issuers with a "Red" MSCI ESG Controversy score. The index's four currency weights are rescaled monthly to match the currency exposure of a market value weighted combination of these four currencies in the Global Corporate Index. The index was created in December 2019, with history backfilled to January 1, 2014. The index is rebalanced on a monthly basis."
- The methodology of the construction of the Index can be found in the fund factsheet of the prospectus.
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