UBS Raises the Bar

    Stockholm (NordSIP) – The ability to combine ESG integration in exchange-traded funds (ETFs) has made them one of the most popular vehicles for sustainable investments. According to a recent survey by JP Morgan, ESG ETFs are expected to be strategies to experience the most growth in the next two to three years.

    This week, UBS Asset Management (UBS AM) launched the UBS ETF S&P 500 ESG Elite. This UCITS ETF is intended for investors who require US large-cap exposure with a strong sustainability profile. The fund is described as the “world’s first ETF to apply strict ESG criteria to the S&P 500 equity universe.” The new ETF differs from UBS’s first ESG fund based on the S&P 500 universe – the UBS S&P 500 ESG ETF – which was launched in February 2019, manages US$1.4 billion in assets and applies less stringent criteria.

    The Elite ETF Fund

    The ETF tracks the S&P 500 ESG Elite Index, which focuses on a portfolio of companies with best-in-class ESG scores representing around 25% of the market capitalization of the S&P 500 universe. The Elite index excludes companies involved in tobacco, alcohol, GMO, gambling, adult entertainment, controversial and military weapons, small arms, predatory lending, nuclear power, fossil fuels and companies with United Nations Global Compact violations, as well as various controversies.

    While the less stringent criteria of the UBS S&P 500 ESG ETF point it towards investors whose aim is to follow the 500 largest US-listed companies with relatively low tracking error, the new fund is aimed at a higher impact. By replicating the S&P 500 ESG Elite index portfolio, the new UBS ETF targets a 40% reduction in carbon footprint relative to its parent index and a 57% improvement in the overall S&P DJI ESG score.

    “This new ETF is intended for investors looking for a strong sustainability profile based on the S&P 500 index universe, which is the largest and most important equity index in the world,” says Clemens Reuter, Global Head of ETF & Index Fund Client Coverage at UBS AM. “The UBS S&P 500 ESG Elite ETF enables investors to take the next step in their sustainable journey and achieve more impact through their investments. As a market leader in sustainability ETFs, our ambition is to meet all ESG investors’ demands. We are proud to expand our sustainability offering in close collaboration with S&P Dow Jones Indices.”

    “We are very pleased to continue working with UBS Asset Management in expanding the S&P 500 ESG index ecosystem,” Reid Steadman, Global Head of ESG Indices at S&P Dow Jones Indices. “Through our innovative indices, investors will be able to access investments that help build a sustainable future and meet the expectations of an evolving market.”

    The Nordics View

    The UBS S&P 500 ESG Elite ETF is available in a US$ share class as well as currency-hedged share classes (CHF, EUR and GBP). The fund will list across key European exchanges, including the London Stock Exchange, Xetra, Borsa Italiana and SIX Swiss Exchange. This new ETF represents a natural next step given UBS AM’s commitment to sustainability.

    According to Florian Cisana, Head UBS ETFs & Index Funds Strategic Markets EMEA at UBS Asset Management, the ‘UBS ETF S&P500 ESG Elite UCITS ETF’ is registered in Sweden, Norway, Finland for retail and professional investors. The ETF is also registered for professional investors in Denmark and will be available on the major Nordic retail platforms.

    “Nordic investors using light, mid and dark screened ESG ETFs depending on their ESG approach on portfolio level,” Cisana tells NordSIP. “S&P 500 is the world’s most popular index tracked by 146 bn in assets of UCITS ETFs alone. Two years ago, we launched the lighter ESG-screened ETF ‘UBS ETF S&P500 ESG’, which has attracted US€1.5 billion in AuM. To offer another solution for investors who prefer a darker screened ESG approach (higher ESG rating and higher TE), we have now launched the ‘UBS ETF S&P500 ESG Elite UCITS ETF’ for which I expect a similar demand as we had for the lighter screened ‘UBS ETF S&P500 ESG UCITS ETF’.”

    “Assets in European ESG ETFs have increased from USD 22bn end-2018 to USD 101bn end-2020 supported by an increased ETF offering of 213 ESG ETFs end-2018 and 393 ESG ETF end-2020,” Cisana says. “The usage of ETFs in the Nordics is lower than in other European countries. As ESG becomes the new ‘normal’, I do expect the trend in Europe to continue and that Nordics will show even above European-average growth rates in ESG ETF assets.”

    “As a pioneer and leader in ESG ETFs, UBS Asset Management offers today 99 ESG ETFs across various asset classes, regions and ESG approaches. We are having a full product pipeline for 2021 and are excited to share the new solutions for investors once launched,” Cisana concludes.

    Image © UBS Asset Management

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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