Swiss-based UBS has unveiled a new passive-like, rules-based equity strategy aimed specifically at countering climate change.
The passive-like, rules-based equity strategy is designed as a cost-efficient way of capitalizing on the transition to a low carbon economy, aiming to keep global warming well below 2°c as stipulated in the Paris Agreement on Climate Change.
As already demonstrated by the $1.5trn in assets committed to the Montreal Carbon Pledge, we are witnessing an increasing number of investors asking how to align their portfolio with their increasing obligations to incorporate sustainable investment factors, yet not compromise their long-term investment goals.
The UBS CCF (IE) Global Climate Aware UCITS Fund (the Fund) is domiciled in Ireland, using a Common Contractual Fund (CCF) structure and is the first such tax efficient Tax Transparent Fund (TTF) launched by UBS Asset Management (UBS AM). Launched in collaboration with a Dutch organization, with over €250m invested at launch, it brings together our Systematic and Index investments expertise with our Sustainable Investing insights.
It follows the successful launch of the award winning UBS Life Climate Aware World Equity Fund, domiciled in the UK, which has now reached over £736m in AUM since its launch in February 2017.
Having reviewed third-party low-carbon indices, we identified a number of limitations, including an over-reliance on exclusion of current high carbon emitters. Therefore, the Fund takes a forward looking, tilts-based approach to data in order to overcome these inefficiencies.
Key aims include:
- Reduce the carbon (CO2) footprint of a passive global equity portfolio by c. 40-50%
- Does so by applying positive and negative tilts to increase or decrease exposure to the index constituents based on their expected contribution to climate change
- Materially increases investment in companies that are best placed to benefit from the growth in demand for likes of renewable energy and associated technologies
- Importantly, investors who buy into this strategy will remain invested in carbon-emitting companies, though at reduced weights, so that they can create a positive change through our proactive voting and engagement strategy, improving companies that most need to adapt their business models in order to meet climate change goals
Ian Ashment, head of systematic and index investments at UBS asset management said: "UBS Asset Management aims to be a leader in sustainability. As clients seek greater alignment between their investment policy and environmental, social and governance concerns we are pleased to have added to our range of passive like, rules-based investment strategies."
Fekko Ebbens, head of institutional client coverage, continued "It is now more the norm than the exception, that clients ask us to deliver investment solutions that embrace a range of ESG considerations. Regulators and governments are also setting out ESG standards and requirements for asset owners to abide by. The launch of the new UBS CCF (IE) Global Climate Aware UCITS Fund is a direct response to meet the needs of our international institutional clients."
In addition, Michael Baldinger, head of sustainable and impact Investing commented, "We are committed to moving sustainability beyond a niche investing activity. This strategy is just one of the innovative ways we are integrating sustainability across our firm."
UBS explained the objective of the fund is to invest its assets into the MSCI World Index constituents which are better positioned to take advantage of the long-term transition to a low carbon global economy, and less in companies that are not adapting to this transition.