A salvo of thematic equity ETFs have hit the market in South Korea, providing exposure to domestic equities of companies providing innovative solutions to combat climate change.
Five different issuers have launched products, each of which is based on the KRX Climate Change Solutions Index and listed on Korea Exchange.
The issuers behind the funds are NH-Amundi, Shinhan AMC, KB Asset Management, Mirae Asset Global Investments, and Samsung Asset Management.
The funds come with expense ratios ranging from 0.09% to 0.30%.
The KRX Climate Change Solutions Index selects its constituents from the KRX BMI universe, a broad representation of common stocks listed on the KOSPI and KOSDAQ markets of Korea Exchange.
The methodology selects all companies classified within the ‘Solutions’ category according to MSCI’s Low Carbon Transition (LCT) assessment which analyses how companies manage the risks and opportunities presented by climate change.
According to MSCI, companies classified within the LCT Solutions category have the potential to benefit through the growth of low-carbon products and services related to renewable energy, electric vehicles, and solar cells, among other sub-themes.
The methodology also includes up to 20 companies that are not classified to the LCT Solutions category but are deemed to have sufficiently high LCT patent scores – a measure of the number of patents a firm holds that are related to low-carbon and other ‘green’ products.
Constituents are weighted by float-adjusted market capitalization subject to a cap of 7.5%. The index is reconstituted and rebalanced on a semi-annual basis.
As of the end of October, one-third (32.8%) of the index weight was allocated to stocks from the electrical equipment industry with the next-largest industry exposures being chemicals (19.0%), transport equipment (13.5%), electronics (10.4%), and information technology (7.0%).
Notable positions included EcoPro BM (9.5%), Samsung SDI (8.9%), Hanwha Solutions (6.9%), LG Chemicals (6.6%), Samsung Electronics (6.4%), and SK Hynix (6.2%).
The five ETFs are as follows:
HANARO KRX Climate Change Solutions ETF (404470 KS) (NH-Amundi)
Expense ratio 0.25%
SOL KRX Climate Change Solutions ETF (404650 KS) (Shinhan AMC)
Expense ratio 0.15%
KBSTAR KRX Climate Change Solutions ETF (403990 KS) (KB Asset Management)
Expense ratio 0.30%
TIGER KRX Climate Change Solutions ETF (404540 KS) (Mirae Asset Global Investments)
Expense ratio 0.09%
KODEX KRX Climate Change Solutions ETF (404260 KS) (Samsung Asset Management)
Expense ratio 0.09%