UBS Asset Management Launches First ETF to Integrate Sustainability Screening

BS Asset Management (UBS AM) bolstered its lineup by launching the first exchange-traded fund (ETF) to integrate sustainability screening into the S&P 500 Index – UBS ETF S&P 500 ESG UCITS ETF.

As one of the foremost innovators in this field, UBS AM joined forces with S&P Dow Jones Indices and RobecoSAM to create a new generation of ETF that is built upon the S&P 500 ESG Index to meet demands for more sustainability focused investors.

The new ETF enables investors to get similar exposure to the S&P 500 equity index but with an integrated environmental, social and governance (ESG) screening which divests from companies that score poorly on ESG criteria, or are producers of tobacco or controversial weapons.

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

“As the market leader in Sustainability ETFs, this new product is the result of close collaboration between UBS Asset Management and S&P Dow Jones Indices,” said Clemens Reuter, Head of ETF & Passive Investment Specialists. “We have pioneered a new generation of Sustainability ETFs, offering a core ESG exposure based on the largest and most important equity index globally.”

“UBS’s goal is to be the world’s leading sustainable financial provider by developing innovative products and solutions to meet the evolving needs of our clients,” added Michael Baldinger, Head of Sustainable & Impact Investing.

Key points

• Simple objective: Exposure to the ubiquitous and highly liquid S&P 500 with a light ESG overlay.
• The ETF market for S&P 500 UCITS ETFs in Europe is approximately USD 100bn.
• The ESG/SRI segment is the fastest growing theme in UCITS ETFs, now approaching USD 15bn in assets.
• Asset owners and wealth managers are experiencing increasing pressure from regulators and end-investors to consider ESG aspects in their investment decisions which consequently has led to accelerated demand for ESG solutions.
• UBS ETFs is a market leader in ESG/SRI ETFs (approx. 35% market share in Europe).
• From a performance perspective, the S&P 500 ESG Index delivers an S&P 500-like return/risk profile, whilst improving the ESG characteristics and addressing an increasing commitment to ESG by investors.
• S&P 500 ESG is a market capitalization weighted index with a light ESG screening which excludes certain business activities, (tobacco and controversial weapons), and those poor scoring ESG companies across industry sectors.
• In addition, the index  omits companies that exhibit a poor adherence to United Nations Global Compact Principles.
• The index ultimately aims for 75% of the market capitalisation of the parent index by excluding the weakest quartile in terms of ESG profiles.
• S&P 500 ESG Index targets sector neutrality vis-à-vis the S&P 500 Index and aims to deliver a tracking error below 100bps.
• As of the end of February 2019, S&P 500 ESG Index has 329 constituents, whereas S&P 500 Index contains 505 constituents.

Details of pending listings: