Two new ETFs have made their debut on Korea Exchange, providing exposure to US dividend-paying equities and clean energy stocks listed worldwide.

The new ETFs provide exposure to US dividend and global clean energy investment strategies.

The KINDEX S&P US Dividend 100 ETF (402970 KS), from Korea Investment Management, comes with an expense ratio of 0.50%, while the KBSTAR Global Clean Energy S&P ETF (399580 KS), from KB Asset Management, costs 0.40%.

US dividend

The KINDEX S&P US Dividend 100 ETF tracks the Dow Jones US Dividend 100 Index.

The index’s eligible universe consists of US-listed common stocks with market capitalizations above $500 million, average daily trading volumes greater than $2m, and at least ten years of consecutive dividend payments.

The eligible securities are ranked by their indicated annual dividend yield (estimated annual dividends for the current year divided by share price) and the lower half of the ranked stocks are eliminated.

The methodology then selects 100 stocks from the remaining pool, choosing companies with the highest composite quality score which is derived from four metrics: free cash flow to debt, return on equity, indicated annual dividend yield, and five-year dividend growth rate.

Constituents are weighted by float-adjusted market capitalization subject to an individual cap of 4% and a sector cap of 25%.

Global clean energy

The KBSTAR Global Clean Energy S&P ETF, meanwhile, is linked to the S&P Global Clean Energy Index.

The index selects its constituents from a universe of developed market stocks with market capitalizations above $300m and average daily trading volumes greater than $3m.

The index uses various screens to build an initial eligible universe of renewable energy stocks. This includes using FactSet’s Revere Business Industry Classification System (RBICS) to identify firms with more than 25% revenue exposure to clean energy-related businesses, using the Global Industry Classification Standard (GICS) to identify companies classified to the ‘renewable utilities’ sub-industry, and using GICS to identify ‘general utility’ companies that generate at least 20% of their power from renewable sources.

An ESG screen removes companies that are in violation of UN Global Compact principles, as well as firms that derive above a certain percentage of their revenue from controversial weapons, civilian firearms, tobacco, thermal coal, oil sands, shale energy, or arctic oil & gas exploration. Additionally, firms with carbon-to-revenue footprints that exceed a certain threshold are also removed.

The index targets 100 constituents, selecting stocks based on renewable energy exposure scores calculated using RBICS classifications, or Trucost’s Power Generation Data for utility companies. The exposure scores are 1 (maximum clean energy exposure), 0.75 (significant clean energy exposure), and 0.5 (moderate clean energy exposure).

The process first selects all companies with an exposure score of 1. If the index contains less than 100 constituents, the methodology also selects the largest companies with exposure scores of 0.75, followed by the largest companies with exposure scores of 0.5, until the 100 constituent count is met.

Constituents are weighted according to their market capitalizations multiplied by their exposure scores. The weight of stocks with exposure scores of 1, 0.75, and 0.5 are capped at 8%, 6%, and 4%, respectively.