United Overseas Bank (UOB) Asset Management has introduced its first ETF in Singapore.
The ETF tilts towards REITs with robust environmental profiles.
The UOB APAC Green REIT ETF (GRE SP), which has been listed on Singapore Exchange, provides ESG-tilted exposure to high-yielding real estate investment trusts (REITs) listed in Asia Pacific and Oceania.
The fund is linked to the newly minted iEdge-UOB APAC Yield Focus Green REIT Index which was developed by SGX in partnership with UOBAM.
The index selects its constituents from a universe of REITs listed in Asia Pacific and Oceania which have market capitalizations above $1 billion and average daily trading volumes greater than $400,000.
The methodology removes REITs ranked in the bottom quintile by one-year total return as well as those in the top quartile by dividend yield in a bid to exclude potential dividend traps.
The remaining REITs are then ranked by total market capitalization and separated into quartiles. The methodology targets 50 constituents, selecting the 13 highest-yielding REITs from each of the first two quartiles and the 12 highest-yielding REITs from each of the lower quartiles.
ESG analysis is then conducted by GRESB, an institutional-asset-owner-led non-profit organization founded to assess the sustainability performance of real assets.
GRESB assigns each REIT with an overall GRESB score that consists of three components: management, performance, and development.
GRESB also assigns each REIT with a separate environmental rating which more directly reflects its environmental impact based on over 50 indicators related to energy use, greenhouse gas emissions, water, and waste.
The chosen constituents are initially weighted by float-adjusted market capitalization and then adjusted to increase the weights of REITs with both superior overall GRESB scores and superior environmental ratings. Additionally, REITs with below-average environmental ratings, regardless of overall GRESB score, have their weights proportionally reduced.
The weighting methodology includes an individual security cap of 7% and a country cap of 40%. The index is reviewed semi-annually in March and September.
As of the most recent review in September, REITs listed in Japan and Australia accounted for the bulk of the index with weights of 40% and 36% respectively, with the remaining weight allocated to REITs listed in Singapore (16%) and Hong Kong (8%).
Major exposures included office REITs, retail REITs, and diversified REITs, each accounting for approximately 30% of the index by weight. Notable positions included Link REIT (7.0%), Mirvac Group (7.0%), Scentre (7.0%), Dexus/AU (6.9%), Nippon Building (6.3%), and Stockland (6.2%).
The index had a trailing 12-month dividend yield of 4.25%.
Thio Boon Kiat, CEO of UOB Asset Management, commented: “The UOB APAC Green REIT ETF gives investors an opportunity to participate in the development of sustainable real estate taking place across Asia Pacific so they can invest for profit and purpose. Backed by our three decades of investment experience in Asia, we believe we are helping investors buy into quality green REITs that will strengthen over time and also receive stable and regular income. We believe that there is no better time to be part of the green wave sweeping across the region’s real estate industry.”
Michael Syn, Head of Equities at Singapore Exchange, added: “Investors want effective price benchmarks, but more importantly, highly liquid and investable instruments that are increasingly tied to standardized and validated ESG data. Together with UOB Asset Management, we have jointly created an index and a yield investment tool that is aligned with positive environmental outcomes. SGX will continue to work with our partners to expand our product franchise to meet investors’ growing appetite for ETFs.”
The ETF comes with a management fee of 0.45%.