Lion Global Investors, a Singapore-based asset manager, has partnered with local brokerage OCBC Securities to create the city state’s first low-carbon ETF.
The fund is the first ETF in Singapore to provide low-carbon exposure to the city-state’s stock market.
The Lion-OCBC Securities Singapore Low Carbon ETF has been listed on Singapore Exchange in Singapore dollars (ESGSG SP) and US dollars (ESGUS SP).
The fund has an expense ratio of 0.45% and has come to market with S$60 million (approx. $40m) in assets.
The ETF is linked to the iEdge-OCBC Singapore Low Carbon Select 50 Capped Index which selects its constituents from a universe of stocks domiciled in Singapore that have market capitalizations above S$500m ($360m). Listings on any developed market stock exchanges are eligible for inclusion.
Using insights from ESG analytics firm Sustainalytics, the methodology screens out companies that derive more than 5% of their revenue from fossil fuels as well as firms that fall within the worst 10% of carbon emitters in the universe. The process is subject to a diversification requirement which ensures that at least 50% of the market capitalization of each GICS sector remains.
From the remaining pool of securities, the index selects the largest 50 stocks. Constituents are weighted by float-adjusted market capitalization while capping mega-cap stocks (those above $200 billion) at 10% and any other stock at 7%.
As of the end of March, stocks from the real estate and financials sectors dominated with weights of 28.0% and 25.9%, respectively, with significant exposure also to the information technology (14.3%), industrials (8.4%), and telecommunications (8.2%) sectors.
Notable positions included United Overseas Bank (7.2%), Oversea-Chinese Banking (7.1%), DBS (7.1%), Singapore Telecommunications (7.1%), and SEA (5.5%).
Commenting on the ETF’s launch, Gerard Lee, CEO of Lion Global Investors, said: “Investors who are conscious about sustainability are spoilt for choice given the surfeit of ESG funds available. However, a majority of these investors are actually looking to invest in low-carbon companies as they see reducing carbon footprint as one of the most tangible ways to contribute to the environment. Lion Global and OCBC Securities are delighted to bring them such a product.”
Wilson He, Managing Director of OCBC Securities, added: “Advancing sustainability is central to OCBC’s strategy as we help our customers strive towards a low-carbon world together. We are glad to find like-minded partners in Lion Global Investors to develop this ETF and take a concrete step in leading the way for corporations to walk the talk when it comes to sustainability.”