UBS Asset Management (UBS AM) has added an exchange traded fund (ETF) to its range, which it claims is the first to screen global sovereign issuers on sustainability criteria.
Clemens Reuter, head of global UBS passive and ETF investments specialists, said: “UBS ETFs is the first mover in launching this new product that fills an important gap in the global government bond universe with a dedicated sustainability-focused ETF.”
The UBS ETF (LU) JP Morgan Global Government ESG Liquid Bond Ucits ETF tracks the JP Morgan Global Government ESG Liquid Bond Index (Total Return), which is exposed to liquid global government bonds based on market capitalisation, and screens sovereigns that do not score adequately on ESG rating criteria.
The parent of the total return bond index is the JP Morgan GBI Aggregate Diversified Index.
Best to worst
Andrew Walsh, head of passive and ETF specialist sales for UK and Ireland at UBS AM, told Expert Investor: “The screening process takes a mix of qualitative and quantitative factors according to Sustainalytics and RepRisk methodologies [into account].
“For the developed market, countries’ ESG rankings are scored in 10 bands: from one (best) to 10 (worst).
“All countries in the lower half are removed. For the emerging markets, smaller countries, with an overall weight of less than 0.25%, are removed. Then, all countries with an ESG score of six to 10 are removed from the index.”
The underlying exposure is diversified across more than 20 sovereign issuers, a spokesperson said in the statement.
From the period August 2014 to August 2019, the JP Morgan Global Government ESG Liquid Bond Index showed a tracking error of 0.35%, a tracking difference of 9 basis points, and a 0.998 daily return correlation compared to the standard non-ESG index, UBS said.
UBS AM, with $858bn (€774bn) invested assets, offers about a third of all ETFs in the European market as of end-September 2019, it said.
The ETF is available on European exchanges, including the German stock exchange platform Xetra, Italy’s stock exchange Borsa Italiana and Six Swiss Exchange.