Industry Updates

UBS switches China ESG ETF to low carbon index

UETC will trade under the same ticker

Theo Andrew


UBS Asset Management is switching the index on its China environmental, social and governance (ESG) ETF to one that focuses on companies with low exposure to carbon emissions.  

The UBS ETF MSCI China ESG Universal UCITS ETF (UETC) will switch its index from the MSCI China ESG Universal 5% Issuer Capped Net Return index to the MSCI China ESG Universal Low Carbon Select 5% Issuer Capped Total Return Net index. 

Effective 1 December, UETC will be renamed to the UBS ETF MSCI China ESG Universal Low Carbon Select UCITS ETF under the same ticker and with a total expense ratio (TER) of 0.65%.  

The ETF, which has $176m in assets under management, will track the new index – based on its parent index – which launched in September.  

The change sees the index provider add a step to its methodology, excluding the top 5% of companies based on their carbon emission intensity from the parent index. 

UBS added that no more than 30% of securities can be excluded from any sector and will re-weight the rest of the securities from the free-float market weights of the parent index.  

As a result, the number of constituents in the index will decrease from 677 to 534 with consumer discretionary and financials remaining the largest two sectors at 32.2% and 21.6%, respectively.  

The move is part of a growing trend by issuers to rebrand their existing suite of ETFs into ESG-related products, normally via an index switch, that can sometimes have a profound impact on the underlying holdings of the ETF. 

Last month, Lyxor also gave its China ETF an ESG makeover, switching index of the €280m Lyxor China Enterprise UCITS ETF (ASIL) from the Hang Seng China Enterprises Net Total Return index to the MSCI China Select ESG Rating and Trend Leaders Net Total Return index. 

DWS has also switched a raft of ETFs to ESG indices, slashing its fees in the process.  

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