OCBC Securities and Lion Global Investors list Singapore's first low-carbon ETF
OCBC Securities and Lion Global Investors will list Lion-OCBC Securities Singapore Low Carbon ETF on the Singapore Exchange (SGX) on 28 April 2022. This is Singapore’s first ETF that focuses on the top 50 Singapore companies with lower carbon intensity.
The Lion-OCBC Securities Singapore Low Carbon ETF tracks the newly-launched iEdge-OCBC Singapore Low Carbon Select 50 Capped Index which was developed by product specialists from across the OCBC Group and SGX through an exclusionary methodology that removes companies with a heavy involvement in the fossil fuels sector or high carbon emissions.
All environmental and carbon intensity data used in the iEdge-OCBC Singapore Low Carbon Select 50 Capped Index are verified by Sustainalytics, a responsible investment research firm specialising in environmental, social and governance.
Continued growth of ETFs
This is the third Exchange Traded Fund (ETF) listed by Lion Global Investors in collaboration with OCBC Securities. Since embarking on the inaugural ETF back in December 2020, the total AUM for both Hang Seng TECH ETF and China Leaders ETF is now nearing almost S$400 million. There is a strong continued interest among investors in these ETFs, with Hang Seng TECH ETF seeing a year-on-year growth of more than 300% in its first year.
ETFs are cost effective on many levels; To buy all 50 stocks that make up the iEdge-OCBC Singapore Low Carbon Select 50 Capped Index, the cost and fees can quickly add up and take a toll on your financials. This ETF launched by OCBC Securities and Lion Global Investors allows investors to invest into multiple companies at one go and it will significantly reduce the cost of building a diversified portfolio.
ETF usually tracks or replicates the movement of the underlying instruments (indices, stocks) very closely. It is one of the more popular ways for portfolio diversification and risk management in times of high market uncertainties and volatilities.
On SGX, the Lion-OCBC Securities Hang Seng TECH ETF was the top ETF by volume (27.7%) and the second most active ETF by turnover (13.3%) in 2021. When it comes to total AUM, the Lion-OCBC Securities Hang Seng TECH ETF was the fourth largest ETF and the Lion-OCBC Securities China Leaders ETF was the eighth largest ETF among 24 equity ETFs listed as of 31 December 2021.
OCBC Securities also saw a surge in its investors’ interest in ETFs, with retail customers’ trading volume in 2020 already more than double that of 2019. In 2021, ETF trades grew by a further 80% year on year.
Investing in a low-carbon future
The belief that sustainable investing requires financial trade-off has been a long-standing one. However, based on data from SGX Index Edge, iEdge-OCBC Singapore Low Carbon Select 50 Capped Index outperformed market benchmarks (STI, SIMSCI) on 3-year, 5-year and 10-year time horizons.
Lion-OCBC Securities Singapore Low Carbon ETF is Singapore’s first ETF that focuses on the top 50 Singapore companies (including Real Estate Investment Trusts and Business Trusts) by Free-Float Market Capitalisation, with a focus on index decarbonisation through the reduction of Weighted Average Carbon Intensity (WACI) of the Index.
WACI measures the carbon intensity of businesses, not its total carbon emissions. It is a calculation of the tonnes of CO2 emitted per US$1 million of company revenue. It then aggregates them using the percentage weight of the holding within the fund. The WACI metric therefore normalises for company size – a large company with large carbon emissions, in absolute terms, may have a lower WACI than a smaller company that pollutes less, in absolute terms, but is less efficient in its processes.
Mr Wilson He, Managing Director of OCBC Securities, said: “Advancing sustainability is central to OCBC’s strategy as we help our customers strive towards a low-carbon world together. We are glad to find like-minded partners in Lion Global Investors and SGX in developing this ETF and take a concrete step in leading the way for corporations to walk the talk when it comes to sustainability.”
A recent study found that 75% of respondents across the globe are integrating ESG into their investment approach. More corporations and individuals are increasingly aware of sustainability and the need to contribute positively to our environment. For a very long time, there has been common misconception that sustainability-linked investments may result in poor returns. However, we are quite clear that we want to offer the opportunity for our customers to invest responsibly and we are confident that ESG investing has the potential to keep up with the traditional funds.”
Mr Gerard Lee, Chief Executive Officer at Lion Global Investors, said “Investors who are sustainability conscious are spoilt for choice given the surfeit of ESG funds available. However, majority of them are actually looking to invest in low-carbon companies as they see reducing carbon footprint as one of the most tangible ways to contribute to the environment. Lion Global and OCBC Securities are, therefore, delighted to bring them such a product. Offered as an ETF listed on the SGX, this gives investors convenience of access and low cost.”
These are all in line with the Singapore Government’s goal when it unveiled the Singapore Green Plan 2030 early last year. The plan charts Singapore’s journey towards a more sustainable future in the immediate future and strengthens the nation’s commitments regarding the United Nations’ 2030 Sustainable Development Agenda and the Paris Agreement.
There are many encouraging signs where it can be seen that societies are moving towards a low-carbon economy: The surge of interest and popularity in electric vehicles, consumers’ willingness to look at alternative energy sources such as solar power and corporations investing in green buildings.
Initial Offer Period
Lion-OCBC Securities Singapore Low Carbon ETF’s Initial Offer Period (IOP) starts on 11 April 2022 and ends on 22 April 2022. It will list on the SGX on 28 April 2022 and will be available in Singapore dollar (SGD) and US dollar (USD) denominations.
Upon listing, the new ETF allows investors to buy much smaller lot sizes of just 1 unit at a time. This feature makes investing into the ETF particularly attractive to younger and newer investors who can start from as little as S$1.00 per unit, based on issue price, excluding commissions and fees.