UBS Unveils First Euro Stoxx 50 ESG ETF


Stockholm (NordSIP) – UBS Asset Management launched a new ETF based on the Euro STOXX 50 ETF. With Euro 31.3bn ETF assets tracking it globally, as of the end of June 2019, the Euro STOXX 50 ETF is the largest benchmark for investors in the Eurozone’s equity market.

“The demand for sustainable investments is accelerating, and the EURO STOXX 50 ESG helps us expand into new markets and segments, widening ESG investment opportunities,” said Clemens Reuter, Head of ETF & Passive Investment Specialists, UBS Asset Management. “At UBS Asset Management, we seek to be a leader and innovator in sustainability-focused ETFs and recently launched an ETF on the EURO STOXX 50 ESG index, taking advantage of the new index and offering clients one more option that meets their SI needs whilst diversifying across industries and markets.”

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The new ETF – UBS’s EURO STOXX 50 ESG UCITS ETF – is created by adding three steps to the existing benchmark. Step 1 excludes the ten companies with the lowest ESG scores, according to Sustainalytics’ methodology. The next step excludes companies that engage in controversial practices or exceed revenue thresholds from undesired business activities. Exclusions focus on companies that fail to comply with the UNGC principles’ four pillars of human rights, labour, environment and anti-corruption. Companies with any revenues from the production and sale of controversial weapons, tobacco or for which 25% of revenues or more come from the extraction of thermal coal and related power generation are also excluded. In Step 3, the gap left by the exclusions in steps 1 and 2 is filled by companies from the same sector as those excluded but with a better ESG score.

According to UBS, “placing this sustainability overlay on the largest blue-chip index in Europe has delivered a daily returns correlation of 0.999 and tracking difference since 2012 of 8 bps per annum compared to the standard benchmark”. Presently the ETF excludes Airbus and Safran due to their involvement in the production of controversial weapons. Safran would also have been blacklisted on account of its low ESG score. Vinci, Volkswagen, Vivendi and Fresenius are also excluded due to low ESG scores. UBS ESG ETF is overweight in most industry sectors than the benchmark STOXX index except for companies in the “Media”, “Construction & Materials” and “Industrial Goods & Services”.

“The ESG-version of our iconic blue-chip index EURO STOXX 50 is another innovative addition to our comprehensive ESG and sustainability suite,” said Willem Keogh, STOXX Head of ESG, Thematic and Factor Solutions. “It is a highly liquid solution for asset owners who are looking for cost-effective ways to integrate sustainable factors in the core of their investments. The new index is suitable for mandates for pension funds, insurance companies, ETFs, passive funds, and structured products.”

This new sustainable ETF will join the UBS ETF S&P 500 ESG UCITS ETF launched in April and increase the portfolio of ESG variant ETFs provided by UBS.

Picture from Pixabay

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In the current economic environment, even the strongest companies will face challenges from the impact of the COVID-19 pandemic. Perhaps now more than ever, understanding the factors that could have a material impact on a company’s sustainability will play a role in investment decision-making.

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