Global X Japan has launched two new Japanese equity ETFs on Tokyo Stock Exchange providing thematic exposure to companies operating in clean technology and companies with strong fundamental characteristics and good corporate governance.
Global X Japan has rolled out two new Japanese equity ETFs on Tokyo Stock Exchange.
The Global X CleanTech ESG Japan ETF (2637 JP) and Global X MSCI Governance-Quality Japan ETF (2636 JP) come with expense ratios of 0.59% and 0.275%, respectively.
Clean technology
The Global X CleanTech ESG Japan ETF tracks the FactSet Japan CleanTech & Energy Index which selects its constituents from a universe of stocks listed on TSE or JASDAQ that have market capitalizations greater than ¥30 billion and minimum average daily trading values of ¥200 million.
The methodology harnesses FactSet’s Revere Business Industry Classification System (RBICS) to screen for companies that derive at least 25% of their revenue from a wide range of industries promoting environmental sustainability. These include industries linked to energy storage and conservation, pollution and resource management, and renewable energy production, among many others.
The index targets 40 constituents by selecting the largest companies while ensuring the inclusion of at least 30 “pure-play” firms – those that derive more than 50% of their revenue from clean technology industries.
Constituents are weighted using a combination of their float-adjusted market capitalization and an ESG Insight score provided by FactSet TruValue Labs that reflects a company’s overall ESG performance relative to sector peers.
Quality governance
The Global X MSCI Governance-Quality Japan ETF, meanwhile, is linked to the MSCI Japan Governance-Quality Index which is based on the parent MSCI Japan universe of large and mid-cap stocks across Japanese equity markets.
The index aims to capture both the financial and corporate governance aspects of quality factor investing. The financial aspects of the quality factor are captured using traditional metrics such as return on equity, financial leverage, and earnings variability. The calibre of corporate governance is determined through 11 measures relating to the independence and diversity of the board of directors, the ownership and control structure of the company, accounting practices, and auditor opinions.
All companies in the universe are assigned a quality score based on the financial aspects of the quality factor. This score is then penalized by a discount factor depending on how many of the 11 governance measures were failed by the firm.
The 125 stocks with the highest adjusted quality scores are selected and weighted by float-adjusted market capitalization subject to a 5% cap per security.