Do good. For your portfolio and our planet.

Here's an update on the Lion-OCBC Securities Singapore Low Carbon ETF.

Lion Global Investors
Lion Global Investors19 Oct 2022 1002 Views
Do good. For your portfolio and our planet.

Introduction

• The Lion-OCBC Securities Singapore Low Carbon ETF was listed in the Singapore stock market on 28 April 2022.

• This ETF is Singapore’s first low carbon ETF and pays semi annual distributions1.

• It is a 21st century and greener version of the Straits Times Index (STI), being Singapore centric and with a stronger focus on low carbon.

• The ETF is passively managed to fully replicate the iEdge OCBC Singapore Low Carbon Select 50 Capped Index.


Key Facts

• Dual trading currencies: SGD and USD

• Total Assets Under Management (AUM): SGD 57.2 million as of 30 September 2022

• Management fee: 0.40% p.a.

• Bloomberg tickers: ESGSG SP (SGD counter)ESGUS SP (USD counter)


Key Features



Why invest in Singapore now?

In terms of historical performance, Singapore has done well in the past 5 years compared to the broader Asia and ASEAN regions. Between 31 December 2016 and 30 September 2022, the iEdge- OCBC Singapore Low Carbon Select 50 Capped Index (the Benchmark Index) cumulatively outperformed5 regional indices (Figure 1) such as the Straits Times Index (STI), MSCI AC Asia Pacific Index and MSCI AC ASEAN Index as of 30 September 2022. In 2022 thus far, we already seen the US Fed implementing 5 rate hikes. Despite the rate hikes, US inflation remained high at 8.3% in Aug 2022. From Jerome Powell’s speech6 on 8 September 2022 the US Fed issued the strongest message to fight inflation until the job is done US interest rates are already expected to rise beyond 4% in 2022 and more rate hikes are expected to come in 2023. While the US Federal Reserve is still expected to increase interest rates, a MAS quarterly study with private sector economists7 still expects Singapore to reach 3.5% economic growth in 2022.

While facing these global headwinds, Singapore’s standing as a safe haven especially stands out On 28 Jul 2022 Fitch Ratings8 affirmed Singapore's Long Term Foreign Currency Issuer Default Rating as AAA with a Stable Outlook. This positions Singapore favorably to attract financial flows seeking stability. As at Sep 2022, Singapore’s market valuation also appears more discounted compared to US, Europe and Asia (Figure 2). Despite a discounted valuation, Singapore’s earnings growth is still expected to be higher than US, Europe and Asia (Figure 2).


Greater volatility is expected to unfold in the coming months. To ride out this volatility, it is key to add an efficient building block in your portfolio. This building block should also be green since ESG9 and climate risks are here to stay. By providing access to 50 leading Singapore companies with lower carbon footprint, the Lion-OCBC Securities Singapore Low Carbon ETF helps you gain exposure to Singapore’s growth while participating in its transition to a low carbon economy.



How does the benchmark index and ETF compare with other Singapore focused ETFs and indices since inception?

Between 28 April 2022 (ETF’s listing date) and 30 September 2022, the Index demonstrated similar performance with the STI and cumulatively outperformed10 the MSCI Singapore Free Gross Return Index (Figure 3 as of 30 September 2022. In the same period, the Lion-OCBC Securities Singapore Low Carbon ETF demonstrated similar performance (Figure 4) with other Singapore focused ETFs such as the SPDR STI ETF and Nikko AM Singapore STI ETF, while cumulatively outperforming11 the Xtrackers MSCI Singapore UCITS ETF as of 30 September 2022. This suggests that you do not have to sacrifice returns in a low carbon portfolio.

Being a little red dot, Singapore is especially sensitive to climate risks and our leaders recognize this. In an event speech12 on 17 August 2022 Ravi Menon (Managing Director of the Monetary Authority of Singapore) mentioned that decarbonising the global economy may trigger inflation and a labour market reset. With higher investments in solar, wind power and electric vehicles, the decarbonization of energy production and consumption will induce a surge in demand for metals and minerals such as copper, aluminium cobalt, lithium and nickel, which can translate into inflationary pressures. All these highlight how climate risks affect Singapore and the world, since these pressures can potentially impact investment returns.

By providing diversified exposure to 50 Singapore companies with lower carbon footprint, the Lion-OCBC Securities Singapore Low Carbon ETF is an efficient building block to hedge climate risks in your portfolio, while helping you do good for the planet.



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