Australia
China
India
Indonesia
Japan
Malaysia
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
Asia is considered key to achieving sustainability goals considering the region’s high contributions to emissions. Among several investment assets, sustainability ETFs have gained popularity to meet ESG investment goals in Asia.
Energy giant BP’s 2021 Statistical Review of World Energy showed that the Asia-Pacific region was responsible for 52% of the world’s carbon dioxide emissions. China alone contributed 59% to the region’s carbon footprint while India was responsible for 13.7%.
IMF says that the Asia Pacific region is more prone to severe weather-related disasters compared to the rest of the world. “In view of Asia’s substantial share of current emissions as well as its expected future emissions growth, China, India, and other large CO2-emitting countries’ policies to curb emissions will be a critical element of the global effort,” says the IMF.
With sustainability needs rising, investors, customers and employees are building new green businesses, says McKinsey, adding that there is nearly a $5 tn opportunity in Asia. The consultancy firm notes four themes for business opportunities in the region — decarbonization, green materials transition, next-gen climate technologies, and biodiversity and nature preservation.
The United Nations in a recent progress report lauded the Asia-Pacific region for its growth via sustainable development but said it has only achieved 14.4% of the progress needed and may miss 90% of its targets set for 2030. This leaves ample scope for investments, with one of them being sustainability ETFs.
There are various other popular asset classes which are being explored by investors, such as green bonds and mutual funds, for participating in Asia’s sustainability story.
Asia sustainability ETFs
Here we explore Asia sustainability ETFs which offer exposure to specialised indices or a basket of securities active in the sustainability space.
HSBC MSCI AC Asia Pacific ex Japan Climate Paris Aligned UCITS ETF
Launched in April 2022, HSBC’s MSCI AC Asia Pacific ex Japan Climate Paris Aligned UCITS ETF invests in companies which are a part of the MSCI AC Asia Pacific ex Japan Climate Paris Aligned Index. The ETF has ongoing charges of 0.05%, and as of June 23, there were total assets under management of $15.82m.
The fund tracks the MSCI index. Since its inception, it has fallen 11.66%, compared to the decline of 11.37% of the benchmark index.
The HSBC ETF has a total number of holdings of 417. Sector-wise, the fund is invested most in IT (25.70%), followed by financials (22.97%), consumer discretionary (12.03%), industrials (8.34%), and communication services (7.88%), among others.*
Region-wise, the fund has the largest allocation to China (29.22%), followed by India (15.29%), Taiwan (13.71%), Australia (13.15%), and South Korea (11.33%), among others.*
Some of Asia’s top technology companies are among the fund’s holdings, the largest being chipmaking leader Taiwan Semiconductor Co Ltd (7.60%). Other top holdings include Korea’s Samsung Electronics Co Ltd (4.14%), China’s tech giant Tencent Holdings (3.90%), Jack Ma’s Alibaba Group Holding Ltd (2.57%), and Australia’s biggest bank Commonwealth Bank of Australia (2.05%).*
Invesco MSCI Pacific ex Japan ESG Universal Screened UCITS ETF
Invesco’s MSCI Pacific ex Japan ESG Universal Screened UCITS ETF was launched in January 2021 and has an ongoing charge of 0.19% and is pegged against MSCI Pacific ex Japan ESG Universal Select Business Screens Index.
Since its inception, the ETF has seen a decline of 8.16% whereas the benchmark has fallen 7.82%. The fund is quite small with assets under management of $6.08m**. It has an ESG Rating of AAA (highest), and a quality score of 9.23 out of 10.
Invesco’s ETF closely tracks the benchmark MSCI index, and has large investments in financials (39.4%), followed by real estate (11.7%), materials (10.6%), industrials (8.6%), and healthcare (7%). Among its country allocations, Australia is at the top with 63.8% allocation, followed by Hong Kong (17.5%), Singapore (12.2%), New Zealand (3%) and China (1.7%), among others.**
The top holdings list of the fund is dominated by financial stocks — AIA Group (5.07%), ANZ Banking Group (4.23%), Hong Kong Exchanges and Clearing (4.18%), Macquarie Group (4.06%), and Woodside Energy Group (3.98%), among others.**
Xtrackers MSCI EM Asia ESG Screened Swap UCITS ETF
Part of the DWS Group, Xtrackers MSCI EM Asia ESG Screened Swap UCITS ETF was launched in 2007, and is benchmarked against the MSCI Emerging Markets Asia ESG Screened Index. The ETF as a total fee of 0.65%.
As of June 23, the ETF has total assets under management of $535.06m. Since its inception, the fund has given 55.22% returns.
The fund is largely invested in IT (26.23%), followed by financials (18.25%), communication services (12.03%), consumer discretionary (10.62%), and consumer staples (5.50%), among others.***
The fund has the highest allocation for China (37.87%), followed by Taiwan (19.59%), India (15.90%), South Korea (15.03%), and Thailand (2.73%), among others.***
The top five holdings of the ETF are — TSMC (9.09%), Tencent (6.40%), Samsung Electronics (4.85%), Alibaba Group Holding (3.83%), and Meituan (1.88%).***
*as of May 31, 2023
**as of June 16, 2023
*** as of March 31, 2023
