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UBS Launches Net Zero-Aligned S&P 500-Based ETF – ESG Today

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UBS Launches Net Zero-Aligned S&P 500-Based ETF

Susan Lahey

April 2, 2024

UBS Asset Management (UBS AM) announced the launch of the S&P 500 Climate Transition ESG UCITS ETF, a new exchange traded fund aimed at investors seeking U.S. large cap exposure with net zero alignment and an improved ESG profile.

Listed across European exchanges, including the London Stock Exchange, Xetra, Borsa Italiana and SIX Swiss Exchange, the new fund is the first UCITS ETF to track a climate transition index based on the S&P 500 universe. The fund is classified as Article 9 under the EU’s SFDR regulation.

The EU’s Climate Transition Benchmark label indicates that a benchmark’s underlying assets are selected, weighted or excluded in a way that ensures the benchmark is aligned with a 1.5ºc warming trajectory, incorporating at least a 30% emissions reduction in greenhouse gas (GHG) emissions relative to the market index, and annual self-decarbonization of 7%, while adhering to diversification and risk-adjusted return characteristics. It also excludes certain activities such as controversial weapons.

The index tracked by the fund employs a two-stage process for selecting and weighting portfolio constituents, first defining an eligible ESG universe by screening companies involved in UN Global Compact violations or exceeding revenue thresholds in activities such as controversial weapons, military contracting, small arms, tobacco, coal, thermal coal, and oil sands or tar sands, and then applying an optimizer to provide for a 30% initial carbon intensity reduction followed by a 7% year-on-year reduction trajectory. The resulting S&P 500 Climate Transition Base ESG Index delivers a net zero aligned solution.

The index, with 369 constituents, aims to limit tracking error by minimizing the active share of sectors, industries, and constituents.

Susan Lahey

Susan Lahey started her career as a business reporter for The Kansas City Star and has worked as a freelancer covering business, investment, technology, sustainability and science for numerous publications. She has also worked as a writer and editor for publicly funded projects mandating environmental cleanup of a molybdenum mine in Northern New Mexico; and recovery and resiliency measures following Hurricane Maria in Puerto Rico. Recently she worked as Director of Communications for a European wave energy company.

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