UBS Asset Management has unveiled a full suite of equity ETFs aligned with the Paris Agreement’s most ambitious goal to limit global warming to 1.5°C above pre-industrial levels.

Suni Harford, President of UBS Asset Management.

The UBS MSCI Climate Paris Aligned UCITS ETFs are designed to reduce investors’ exposure to climate-related risks, whether physical or related to the transition to a lower carbon economy.

The funds are based on MSCI Climate Paris Aligned Indices which were introduced by MSCI in October of last year.

An initial five funds have been rolled out with listings across major European exchanges including SIX Swiss, Borsa Italiana, and Xetra. A further two funds are expected in the near future.

The MSCI Climate Paris Aligned Indices are derived from some of MSCI’s best-known global, regional, and country benchmarks.

In terms of the UBS ETFs, the underlying indices provide exposure to global (derived from the MSCI ACWI Index), global developed (MSCI World), US (MSCI USA), European (MSCI Europe), eurozone (MSCI EMU), Japanese (MSCI Japan), and emerging market (MSCI Emerging Markets) equity universes.

The index construction methodology first removes companies in the universe that are involved in controversial weapons, tobacco, and thermal coal, as well as firms deriving revenue from oil and gas-related activities.

The indices then reweight securities based on the risks and opportunities associated with the climate transition. MSCI harnesses a diverse array of data and analytics to feed into the construction process including scope 1, 2, and 3 carbon emissions, green revenues, and the index provider’s own proprietary low carbon transition score and climate value-at-risk measures.

Each index offers an immediate 50% reduction in weighted average carbon intensity as well as a further 10% annual decarbonization going forward.

The indices also aim to deliver on a range of secondary objectives such as maximizing exposure to sustainable energy providers, increasing the weight of companies with clear carbon reduction targets, minimizing fossil fuel exposure, and reducing climate value-at-risk by 50%.

According to UBS, these objectives mean the ETFs qualify as Article 9 products under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).

Suni Harford, President of UBS Asset Management, said: “As the world transitions to a lower-carbon economy, our goal is to be at the forefront of the transformation, providing the solutions investors need to align their portfolios with their chosen glide-path. We are pleased to further expand our extensive offering of sustainable ETFs with the launch of this new suite of Paris-aligned products that enable clients to proactively address climate risks and also benefit from opportunities arising from decarbonization.”

Clemens Reuter, Global Head of ETF & Index Fund Client Coverage at UBS Asset Management, added: “This suite of Paris-aligned ETFs offers investors portfolio building blocks with the added benefit of restricting CO2 emissions to limit the global temperature rise to 1.5°C. This launch demonstrates our strength in providing solutions that meet the highest sustainability standards from emerging regulations.”

The five inaugural funds are as follows:

UBS ETF (IE) MSCI World Climate Paris Aligned UCITS ETF (WOPA SW; WOPA IM; AW10 GY)
Total Expense Ratio: 0.20%

UBS ETF (IE) MSCI USA Climate Paris Aligned UCITS ETF (USAPA SW; USAPA IM; AW16 GY)
TER: 0.12%

UBS ETF (IE) MSCI Europe Climate Paris Aligned UCITS ETF (EURPA SW; EURPA IM; AW13 GY)
TER: 0.18%

UBS ETF (IE) MSCI EMU Climate Paris Aligned UCITS ETF (EMUPA SW; EMUPA IM; AW1Z GY)
TER: 0.18%

UBS ETF (IE) MSCI Japan Climate Paris Aligned UCITS ETF (JAPA SW; JPA IM; AW15 GY)
TER: 0.20%

The two funds due to be rolled out in the near future are:

UBS ETF (IE) MSCI ACWI Climate Paris Aligned UCITS ETF (ACPA SW; ACPA IM; AW14 GY)
TER: 0.22%

UBS ETF (IE) MSCI Emerging Markets Climate Paris Aligned UCITS ETF (EMPA SW; EMPA IM; AW12 GY)
TER: 0.23%