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 ETF tracks the iEdge-OCBC Singapore Low Carbon Select 50 Capped Index which is made up of a basket of the top 50 Singapore companies (including Real Estate Investment Trusts and Business Trusts) by free-float market capitalisation with low carbon intensity. The carbon intensity of each of the 50 companies is verified by Sustainalytics, an established investment research firm specialising in environmental, social and governance (ESG) research, ratings and data.
The iEdge-OCBC Singapore Low Carbon Select 50 Capped Index, launched on 14 March this year, was developed by product specialists from across the OCBC Group and the SGX through an exclusionary methodology that removes companies with a heavy involvement in the fossil fuels sector or high carbon emissions.
The Weighted Average Carbon Intensity (WACI) is used to measure the Index’s exposure to carbon-intensive companies. 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 Index. The WACI metric therefore normalises the measurements based on 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.
Based on data from SGX Index Edge, the iEdge-OCBC Singapore Low Carbon Select 50 Capped Index has outperformed market benchmarks (STI, SIMSCI) on 3-year, 5-year and 10-year time horizons.
Continued growth of ETFs
This is the third Exchange Traded Fund (ETF) listed on the SGX by Lion Global Investors in collaboration with OCBC Securities. Since embarking on the inaugural ETF back in December 2020, the total AUM for both Lion-OCBC Securities Hang Seng TECH ETF and Lion-OCBC Securities China Leaders ETF is nearing almost S$400 million. There is a strong continued interest among investors in these ETFs, with Lion-OCBC Securities Hang Seng TECH ETF seeing a year-on-year growth of more than 300% in its first year.
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 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.
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. Hence, the Lion-OCBC Securities Singapore Low Carbon ETF allows investors to invest into multiple companies at one go, significantly reducing 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.
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.
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, where we jointly worked on developing this ETF together. Launching this product help us 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.”
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.