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Lion-OCBC Securities Singapore Low Carbon ETF (ESG/ESU): How You Can Do Good With Your Money Through Singapore’s First Low-Carbon ETF

Invest for your (and the earth’s) future.


Not too long ago, profitable investing and doing good for the planet used to be objectives that sit on the extreme ends of a spectrum. On one hand, investors aim to maximise their returns by investing in the right companies while on the other hand, saving the earth usually means that you need to fork out money instead to help causes that you believe in.

However, this is about to change as global warming becomes the defining crisis of our time. We can no longer ignore the disastrous effects of climate change which bring about more frequent and intense drought, heat waves, rising sea levels and warming oceans.

In fact, there is a burgeoning group of retail investors looking to make their money work for a greater good by investing in companies that focus on environmental, social and governance (ESG) aspects.

On that note, OCBC Securities and Lion Global Investors have recently launched the Lion-OCBC Securities Singapore Low Carbon ETF that tracks the newly-launched iEdge-OCBC Singapore Low Carbon Select 50 Capped Index.

In this edition of 4 Stocks This Week, we look at some of the things investors need to know before they choose to invest in the Lion-OCBC Securities Singapore Low Carbon ETF (SGX: ESG/ESU)

Investment Objective Of The Lion-OCBC Securities Singapore Low Carbon ETF

The investment objective of the ETF is to mirror the iEdge-OCBC Singapore Low Carbon Select 50 Capped Index. The Index aims to tracks the 50 globally-listed Singapore companies by Free-Float Market Capitalisation, with a focus on index decarbonisation through the reduction of Weighted Average Carbon Intensity (WACI) of the Index.

Simply put, the ETF invests in 50 large companies with minimal involvement in fossil fuels and constitute to an overall low carbon footprint.

Based on the chart above, the Low Carbon Select 50 Capped Index has achieved an average of 50% reduction in WACI historically as compared to existing benchmarks like the Straits Times Index.

ETF Performance and Expense Ratio

As previously mentioned, many people have the long-time belief that sustainable investing requires a certain extent of financial trade-off.

However, based on the underlying iEdge Index’s factsheet, it has delivered an annualised return of 11.59% for the past 5 years up till 31 December 2021.

For a quick background, PR stands for Price Returns and NTR stands for Net Total Return inclusive of dividend returns. That explains why the 5-Year NTR of 11.59% is higher than the 5-Year PR of 7.63%.

In addition, the fund’s expense ratio is capped at an affordable 0.45% per annum for the first two years of the ETF’s inception.

Index Review

The Index will be reviewed semi-annually in March and September, with the data cut-off dates at the last Business Day of February and August respectively. Constituent review results will be announced within two weeks of Rebalancing Implementation Dates.

On top of that, there is a tiered mechanism involved where the index will limit exposure of stocks with equal and more than US$200 billion market capitalization at 10% for each Rebalancing Implementation Date. Stocks with less than US$200 billion market capitalization will be capped at 7% for the same period.

Breakdown Of The Top 10 Constituents Lion-OCBC Securities Singapore Low Carbon ETF

The weightage of the top ten constituents come up to a significant 55.2% of the entire Index so it is important to know the stocks within this list.

Among them, eight of them are our SGX-listed blue-chip stocks such as United Overseas Bank Ltd, DBS Group, Singtel, Singapore Exchange and even Wilmar International. The remaining two Singaporean-domiciled companies are listed in Nasdaq – i) Sea Limited is a consumer internet company renowned for its E-commerce platform Shopee and ii) Flex Limited is the world’s third largest multinational electronics contract manufacturer.

Out of the entire ETF, Real Estate represents the largest sector occupying a 28% weightage. The next two largest segments are Financials and Technology, with respective weights of 25.9% and 14.3%.

#5 Easy access from as low as $1

Investors can partake in this sustainable investing journey from as little as $1*. The investment capital can hail from either cash or Supplementary Retirement Scheme (SRS).

Last but not least, this ETF is also made available in many participating dealers (non-exhaustive) with the likes of CGS-CIMB, Moomoo, Poems and FSMone.

*Assumes issue price of S$1 per unit, excluding fees and charges

Read Also: 5 China-Focused S-REITs That You Can Invest In: CapitaLand China Trust; BHG Retail REIT; Dasin Retail Trust; EC World REIT; Sasseur REIT

Awareness of the adverse effects of climate change has started a revolution where investors are now seeking to contribute actively to decarbonisation goals via investing.

Furthermore, based on data from SGX Index Edge, 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.

In a nutshell, investors can enjoy the best of both worlds by doing social good for the planet and enjoying ‘sustainable’ returns at the same time.

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4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.