Cathay Securities has launched a new ETF in Taiwan providing exposure to locally listed equities with high dividend yields and favourable environmental, social, and governance (ESG) profiles.

Cathay Securities has launched a new ETF in Taiwan offering ESG-screened high dividend exposure.

The Cathay MSCI Taiwan ESG Sustainability High Dividend Yield ETF (00878 TT) has listed on Taiwan Stock Exchange and comes with a management fee of 0.30%.

The fund is linked to the MSCI Taiwan Select ESG Sustainability High Yield Top 30 Index which is based upon the parent MSCI Taiwan universe of large- and mid-cap stocks.

The methodology uses insights from MSCI ESG Research to initially exclude companies embroiled in severe ESG-related controversies.

Each firm is then assigned an ESG rating based on a seven-point scale between AAA and CCC which indicates how well that company manages key ESG issues relative to industry peers. Firms that are considered ESG laggards (those with ratings below BB) are also removed.

The remaining constituents are ranked using a dividend score that is derived using a 25% contribution of the firm’s current dividend yield and a 75% contribution of its average dividend yield over the past three years.

The 30 highest-ranked stocks are selected for inclusion and weighted according to their dividend score in a bid to enhance the high-income nature of the index. The weight of any single constituent is capped at 15%.

The fund is only the second ETF in Taiwan to provide ESG-screened exposure to the country’s equity market. The first, unveiled in August 2019, is the Yuanta FTSE4Good TIP Taiwan ESG ETF (00850 TT) which comes with an expense ratio of 0.34%. It tracks the FTSE4Good TIP Taiwan ESG Index which provides broad exposure to Taiwanese equities while screening out companies from disreputable industries as well as those that are deemed unable to sufficiently manage their ESG risks.