UBS Asset Management announced it will switch its USA quality and prime value factor ETFs to indices incorporating environmental, social and governance (ESG) characteristics.
From 31 July the $1.5bn UBS ETF Factor MSCI USA Quality UCITS ETF (UQLTD) and $461m UBS ETF Factor MSCI USA Prime Value UCITS ETF (MUUSAS) will be renamed the UBS ETF Factor MSCI USA Quality ESG UCITS ETF and UBS ETF Factor MSCI USA Prime Value ESG UCITS ETF, respectively.
UQLTD will see its underlying index change from the MSCI USA Quality index to the MSCI USA Quality ESG Low Carbon Select index, while MUUSAS will change from tracking the MSCI USA Prime Value index to the MSCI USA Prime Value ESG Low Carbon Select index.
Both new indices aim to reduce portfolio exposure to potential emissions risk by fossil fuels by 30% and improve the weighted average, industry adjusted ESG score versus the parent index.
UQLTD’s new benchmark still aims to provide exposure to US large and mid-cap companies with a high return on equity, stable year-on-year earnings growth and low financial leverage.
The quality ESG index has 100 constituents, 25 fewer than its parent benchmark.
MUUSAS will continue to capture US large and mid-cap companies MSCI deems to have relatively low valuations and high quality characteristics.
The prime value ESG index has 116 constituents, 39 fewer than its vanilla equivalent.
Following the changes, UBS AM expects both ETFs to be recategorized from Article 6 to Article 8 under the EU’s Sustainable Finance Disclosure Regulation (SFDR).
The methodology overhauls will see the firm expand its ESG and low carbon US equity range after launching the UBS ETF USA Dividend Aristocrats ESG Elite UCITS ETF (CHSB) earlier this month.