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UBS Asset Management launches ETF combining Climate Transition Benchmark criteria to the S&P 500 index universe


UBS Asset Management has launched the first UCITS ETF tracking a climate transition index based on the S&P 500 index universe.

The firm writes that the UBS ETF S&P 500 Climate Transition ESG UCITS ETF is intended for investors who require US large cap exposure with a net zero overlay combined with improvement of the overall ESG profile. The S&P 500 index is the flagship index for US equity exposure, so this ETF opens the possibility for investors wishing to retain the S&P 500 universe whilst applying a CTB overlay.

The index tracked by the fund employs a comprehensive two stage process for selecting and weighting portfolio constituents to be collectively compatible with the transition to a low carbon and climate resilient economy.

The first step defines an eligible ESG universe by applying business activity exclusions which include companies involved in UN Global Compact violations or exceeding revenue thresholds in activities such as controversial weapons, military contracting, small arms, tobacco, coal, thermal coal, and oil sands or tar sands.

The second step is designed to help investors manage climate transition risks and capture climate change opportunities. This step uses an optimizer to provide for a 30 per cent initial carbon intensity reduction followed by a 7 per cent year-on-year reduction trajectory. The resulting S&P 500 Climate Transition Base ESG Index delivers a net zero aligned solution. Furthermore, the index provides for an improvement in overall ESG score compared to the parent index.

The index aims to keep tracking error limited by minimizing the active share of sectors, industries and constituents. It also ensures a broad representation of the underlying market with 369 constituents.

The UBS S&P 500 Climate Transition ESG ETF is available in a USD share class as well as currency-hedged share classes (EUR and GBP). Listings will be across key European exchanges, including the London Stock Exchange, Xetra, Borsa Italiana and SIX Swiss Exchange.

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