UBS launches MSCI socially responsible Switzerland ETF on SIX

Sep 15th, 2017 | By | Category: Equities

UBS has launched the UBS MSCI Switzerland IMI SRI ETF (CHSRI) on SIX Exchange, providing total market exposure to Swiss-listed equities while avoiding those companies which are perceived to be negatively impacting society.

UBS launches MSCI socially responsible Switzerland ETF on SIX

CHSRI offers access to Swiss equities with a strong sustainability profile.

The fund tracks the MSCI Switzerland IMI Extended SRI 5% Issuer Capped (Net Return) Index. The index captures large, mid and small-cap stocks of the Swiss equity markets and is designed for investors seeking exposure to Swiss companies with strong sustainability profiles. Constituent selection is based on research provided by MSCI ESG Research.

The index is derived from the MSCI Switzerland IMI Index and is constructed in two stages. First, securities of companies involved in nuclear power, tobacco, alcohol, gambling, military weapons, civilian firearms, GMOs and adult entertainment are excluded. Secondly, MSCI’s best‐in‐class selection process is applied to the remaining securities.

The index provider evaluates each remaining firm based on the most pertinent ESG themes specific to its sub-industry and assigns an ESG rating between AAA (highest) and CCC (lowest). Companies must have an MSCI ESG rating above ‘BBB’ and the MSCI ESG Controversies score greater than 3 to be eligible for inclusion. The methodology furthermore targets companies with the highest ESG ratings making up 25% of the market capitalization in each sector of the parent index. From 111 securities within the parent index the screening process results in 39 stocks selected for final inclusion in the SRI-focused index.

Constituents are weighted by market cap with the index limiting company concentration by constraining the maximum weight of a company to 5%. There are several stocks which have reached this 5% cap as of the end of August including Lonza, Sika Inhaber, Swisscom, LafargeHolcim, Zurich Insurance Group, UBS Group, Nestle, Swiss Re and Givaudan. Most notably, by capping constituents at 5%, the index dramatically reduces the influence of Nestle which holds a 20.2% weight in the parent index.

The index’s largest sector exposures are to materials (19.4%), financials (17.8%), industrials (15.1%), consumer staples (12.5%) and health care (12.2%).

Using back-tested data the index has significantly outperformed its parent since 29 May 2017 (the furthest MSCI has back-tested the index). It has generated a 9.7% per annum return with a 17.4% annualized volatility, compared to a 1.9% annualized return and a 20.4% annualized volatility for the MSCI Switzerland IMI.

Source: MSCI.

CHSRI trades in Swiss francs and has a total expense ratio (TER) of 0.28%.

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