UBS Supports Paris Agreement With New Art 9 ETFs

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    Stockholm (NordSIP) – UBS Asset Management (UBS AM) launched a suite of exchange-traded funds (ETFs) with ESG objectives and characteristics that qualify the funds as Article 9 products under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).

    This is the second launch of SFDR-categorised ETFs from UBS AM since the regulation came into force at the start of March. “There is strong investor demand for Paris Aligned ETFs. The launch of SFDR also triggered client interest and many discussions, but it is still too early in the process to see a material shift in client allocation. We’ll be able to see if the new regulation leads to large shifts in client allocations in the months to come,” says Florian Cisana (Pictured), Head UBS ETFs & Index Funds Strategic Markets EMEA at UBS AM.

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    The UBS MSCI Climate Paris Aligned UCITS ETFs

    The UBS MSCI Climate Paris Aligned UCITS ETFs aim to support equity investors in reducing their climate risks. Subfunds focus on Europe, the Eurozone, Japan, the USA, the MSCI World, the MSCI All Worlds Country Index (ACWI) and Emerging Markets. The global and regional exposures seek to benefit from opportunities arising from the shift to a lower-carbon economy while aligning with and exceeding the Paris Agreement requirements.

    The ETFs track the MSCI Climate Paris Aligned Indexes, which create portfolios of companies that meet a set of criteria around climate change risks and opportunities. The index methodology excludes companies involved in controversial weapons, tobacco, thermal coal and oil & gas related activities. Companies that faced very severe ESG controversies (e.g. Societal norms violations) or have been involved in environmental controversies are excluded as well. Companies deriving revenue from oil and gas-related activities are also excluded.

    The MSCI Climate Paris Aligned portfolios follow an optimization-based approach that aims to achieve several objectives, such as a reduction by 50% of the index’s carbon footprint, have a 10% year-on-year self-decarbonization glidepath as well as a reduction of the Index’s exposure to physical risk arising from extreme weather events by at least 50%. The ETFs are aligned with TCFD recommendations and with a 1.5°C climate scenario and aim to increase the weight of companies exposed to climate transition opportunities and companies with credible carbon reduction targets. As is the case with all of UBS ETFs’ 323, the new suite of Climate Paris Aligned ETFs are managed by UBS AM’s global passive portfolio management teams which manages US$466 billion in passive assets.

    The new UCITS ETFs will benefit from the participation of both the SI team and investment analysts/PMs for stewardship activities as is the case across all UBS’s asset classes and passive and active strategies, according to Cisana.

    “In our 2020 stewardship report, we counted 429 engagements with 277 companies across sectors and topics. The majority of these engagements are conducted with CEO/CFOs/Chairman or board members and progress against objectives is tracked through internal systems,” Cisana explains. “Two-thirds of these interactions had involved UBS AM investment teams and one-third was led independently by investment professionals without direct involvement from our SI team. This is the direction of travel. We are equipping and training investment professionals to integrate and engage on ESG issues with the support of the SI team,” Cisana adds.

    The Transition to the Lower-Carbon Economy

    “As the world transitions to a lower-carbon economy, our goal is to be at the forefront of the transformation, providing the solutions investors need to align their portfolios with their chosen glide path,” Suni Harford, President of UBS Asset Management, says. “We are pleased to further expand our extensive offering of sustainable ETFs with the launch of this new suite of Paris-aligned products that enable clients to proactively address climate risks and also benefit from opportunities arising from decarbonisation.”

    “This suite of Paris-aligned ETFs offers investors portfolio building blocks with the added benefit of restricting CO2 emissions to limit the global temperature rise to 1.5°C,” adds Clemens Reuter, Global Head of ETF & Index Fund Client Coverage at UBS Asset Managemen. “This launch demonstrates our strength in providing solutions that meet the highest sustainability standards from emerging regulations.”

    The ETFs will be listed across key European exchanges, including Xetra, Borsa Italiana and SIX Swiss Exchange.

    Image courtesy of UBS AM
    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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