UBS Asset Management is broadening its Exchange-Traded Fund (ETF) product range.

UBS Asset Management is broadening its Exchange-Traded Fund (ETF) product range.

Article 9 ETFs Under SFDR Embrace Sustainable Investment Objectives

Article 9 ETFs, a category of investment products under the European Union's Sustainable Finance Disclosure Regulation (SFDR), are designed to achieve a sustainable investment objective. These funds aim to make a positive environmental or social impact at their core, beyond purely financial returns.

The primary goal of Article 9 ETFs is to target sustainable investments that contribute to environmental or social objectives, such as climate change mitigation aligned with EU Taxonomy criteria, social inclusion, or biodiversity protection.

To achieve this goal, ESG factors are integrated as a binding part of the investment process, ensuring investments align with sustainability goals, including ESG risk management and proactive impact. These funds also commit to promoting good governance standards among investments, ensuring ethical management practices.

Moreover, Article 9 ETFs must adhere to the Do No Significant Harm (DNSH) principle, avoiding investments that could cause significant harm to any environmental or social objectives.

Enhanced disclosure requirements are another key characteristic of Article 9 ETFs. These products are required to provide detailed disclosures to investors on how sustainability objectives are pursued, including alignment with frameworks like the EU Taxonomy and transparent reporting on sustainability metrics and risks.

UBS Asset Management's Paris-Aligned ETFs serve as an illustration of Article 9 products. These ETFs pursue a climate-focused sustainable investment strategy aligned with the Paris Agreement goals, aiming to reduce carbon emissions significantly and support the transition to a net-zero economy. The MSCI Climate Paris Aligned Portfolios, to which the new ETFs belong, aim to achieve goals that support the transition to a lower-carbon economy.

Investors can benefit from the opportunities arising from the transition to a lower-carbon economy through these new ETFs. The index methodology for these ETFs excludes companies active in controversial industries such as arms, tobacco, and coal, as well as those deriving their revenues from oil and gas activities. The index for these ETFs has a higher weighting of companies for which climate change-related opportunities arise.

UBS Asset Management has launched two new sustainable ETFs: the MSCI All Country World Index (ACWI) PAB UCITS ETF (ISIN: IE00BN4Q0P93) and the MSCI Emerging Markets (EM) PAB UCITS ETF (ISIN: IE00BN4Q1675). These ETFs facilitate investments in line with the recommendations of the Task Force on Climate-related Financial Disclosures and the 1.5°C target. The new ETFs aim to be at least 50% less exposed to physical risks from extreme weather events.

In summary, Article 9 ETFs under SFDR are defined by their explicit sustainable investment objectives, rigorous ESG integration, alignment with EU sustainability standards, and the goal to achieve measurable positive environmental or social impact, as exemplified by UBS Asset Management's Paris-Aligned ETFs.

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