Singapore-based UOB Asset Management (UOB AM) has added to its roster of sustainable products on the Singapore Exchange (SGX) with the listing on November 23 of the UOB Asia Pacific Green Real Estate Investment Trust Exchange-Traded Fund (APAC Green REIT ETF).
The listing is a world first, the company says, as it involves the first ETF that provides investors with access to green real estate in the Asia-Pacific region. The new product comes on the heels of another sustainable fund, UOB’s United Smart Sustainable Singapore Bond Fund, launched in October.
In addition to enabling individuals to invest in quality green real estate investment trusts (Reits) across the Asia-Pacific, the APAC Green REIT ETF aims to replicate the performance of the iEdge-UOB APAC Yield Focus Green REIT Index, which was developed by UOB AM in cooperation with the SGX.
Faizal Gaffoor, UOB AM group chief marketing officer, says the company is betting ongrowing investor demand for sustainable investments, increasing adoption of ESG practices and strong investor appetite for REITs as a form of passive income to boost the performance of the APAC Green REIT ETF.
“With its green tilt, the UOB APAC Green REIT ETF also offers investors investment opportunities in quality green REITs across the region that will strengthen over time and provide regular dividend income,” Gaffoor says.
In its initial offer period, the APAC Green REIT ETF attracted more than S$80 million ($58.66 million), Gaffoor says, adding that the company is targeting to reach about S$200 million in assets under management in the next six months.
UOB AM is also banking on the popularity of ETFs among local investors, given their diversified portfolios and ease of trading.
“Investors can access different asset classes across geographic regions, sectors and even investment themes or strategies. As ETFs also have lower transaction costs compared with structured products or conventional unit trusts, they help to democratize securities trading for individual investors,” Gaffoor says.
The index tracks 50 higher-yielding Reits across Asia-Pacific that display “relatively better environmental performance” while meeting liquidity requirements, UOB AM notes. Reits included in the index were evaluated based mainly on Global ESG Benchmark for Real Assets (GRESB) data that rate firms’ environmental performance and include metrics on efforts to lower greenhouse gas emissions, advance energy and water conservation, and support green building certification.
Reits featured in the UOB APAC Green REIT ETF are spread across Australia, Hong Kong, Japan and Singapore and include industrial, office, residential and retail properties. During the initial offering period, the ETF attracted more than S$80 million (US$58.5 million) in assets. The ETF is aiming for a quarterly dividend yield of 4% per year, based on the earnings potential of real estate companies.
Green real estate, says Wee Ee Cheong, deputy chairman and CEO of UOB, will be a huge driver in the transition to lower-carbon economies and will have tremendous growth potential and investment opportunities in the coming years. The projected demand for office space across Asia-Pacific, according to UOB AM, is expected to grow to 1.35 billion square feet or by 65% by 2030 from the current level, largely on the back of a growing workforce.
The index that UOB AM developed with SGX, notes Michael Syn, the exchange’s head of equities, was in response to investors’ desire for highly liquid and investable instruments tied to “standardized and validated” environmental, social and governance (ESG) data.
Compared with other Asia-Pacific Reit indices that do not have a green tilt, the iEdge-UOB APAC Yield Focus Green REIT Index, UOB AM says, has a markedly better environmental performance. Specifically, Reits in UOB AM’s green-weighted ETF report Scope 1 and 2 greenhouse gas emissions that are on average 4% lower, consume 3% less energy in their operations, and have 7% lower water consumption.