May 2023

Client engagement | Client story

Investing for Asia’s
low-carbon transition“We chose the FTSE Asia Pacific Low Carbon Select index for our new ESG
ETF to help our clients benefit from the growing trend in the Asia-Pacific region
towards low-carbon investments. Governments are playing a significant role indriving this trend and we see a lot of companies increasing their low-carbon
expenditures.”
Chen Wang, Head of Product and Client Strategy, CSOP Asset Management

About the clientProfileObjectives

Investment criteria

CSOP was founded in Hong Kong in2008. The firm now employs over 100
professionals and had over $13.5bn inassets under management as of 31
March 2023. CSOP is an ETF leader inthe Asian market, known for its
innovative and sizeable ETF products.

CSOP wished to launch an equity
ETF that would help investors capture
the Asia-Pacific economic growth
opportunity, as well as benefiting fromthe accelerating trend towards a lowcarbon future.

The FTSE Asia Pacific Low Carbon
Select index aims to shift the stockand sector weights of the starting
index away from more energyintensive industrial and manufacturingbusinesses and towards thetechnology, service andconsumerfocused businesses that arelikely to benefit from the low-carbon
transition.

Client engagement | Client story

Client profile
CSOP Asset Management Limited (“CSOP”) was founded in Hong Kong in 2008,
the first offshore entity to be set up by a regulated mainland Chinese asset
manager. In 2018, CSOP extended its business to Singapore. The firm now
employs more than 100 professionals in Hong Kong and Singapore. As of 31 March
2023, CSOP had over $13.5bn in assets under management.1
As well as managing active funds, CSOP is an ETF leader in the Asian market,known for its innovative and sizeable ETF products in diverse asset classes andproduct categories. CSOP has worked with FTSE Russell for over a decade andlaunched the pioneering CSOP FTSE China A50 ETF in 2012, the first physicallyreplicated ETF to track the largest 50 Chinese domestic shares (“A shares”).
In 2019, CSOP officially became a signatory of UN Principles for Responsible
Investment (UNPRI), committing the firm to incorporate responsible investments
into its investment decisions. In 2021, CSOP became a public supporter of therecommendations of the Task Force on Climate-related Financial Disclosures(TCFD).

Client objectives
Since 2020 and despite the disruption associated with the coronavirus pandemic,
the Asia-Pacific region has demonstrated the highest and most resilient growth
rates in the world, reflecting the huge capacity of local markets, powerful trade
networks, technological innovations and the efficiencies of regional (rather thanglobal) supply chains.
CSOP wished to launch an equity ETF that would help investors capture the AsiaPacific economic growth opportunity, as well as benefiting from the accelerating
trend towards a low-carbon future.
There are several factors supporting this trend:––––

The FTSE Asia Pacific Low
Carbon Select index offers
exposure to around 200 stocks
in 11 developed and emerging
Asia-Pacific equity markets.
The index excludes companies
involved in controversial product andconduct categories and then allocateshigher weights to companies with zeroor lower fossil fuel reserves and lower
carbon emissions intensity.

Amongst global regions, Asia-Pacific is considered the most vulnerable toclimate change from an economic perspectiveGovernment policy is a big driver for the low-carbon transition
Companies are growing their low-carbon expenditures in response, potentiallygenerating the largest-ever capital investment cycle
The region’s pension and sovereign wealth funds are turning to low-carbon
investment.

FTSE Russell

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Client engagement | Client story

Drivers of APAC low-carbon investment demand
The Asia Pacific Region is Prone to Climate Change
McKinsey expects Asia makes up more than two-thirds of theannual global GDP loss from climate impact.*Government Policy is A Big Driver for Low Carbon
Japan, New Zealand, South Korea have set net -zero emissions
targets by 2050 in law, and Australia, Singapore have targeted
2050 to realize carbon neutrality in policy document.^
Companies Expanding Expenditure for Carbon Neutrality
Net zero in 2050 require global capital spending of ~US$275
trillion, the biggest capital cycle the world has ever seen.#
Pension and Sovereign Wealth Funds Turning to Low Carbon
Investment
For example, Australian Superannuation Fund strives to reducecarbon emissions in the fund’s investment portfolio by 45% by2030.
* Source: McKinsey Global Institute “Climate risk and response in Asia”. November 2020.
^ Source: Energy & Climate Intelligence Unit. United Nations.
# Source: McKinsey “The net-zero transition: What it would cost, what is could bring”. January 2022.

Solution
In 2022, CSOP teamed up with FTSE Russell to launch the CSOP CGS-CIMB
FTSE Asia Pacific Low Carbon Index ETF. Listed in Singapore, the ETF aims toreplicate (before fees) the performance of the FTSE Asia Pacific Low Carbon Selectindex.
Drawing from the constituent list of the FTSE Asia Pacific index, FTSE Russell’sprincipal regional equity benchmark, the FTSE Asia Pacific Low Carbon Selectindex is built using transparent, easy-to-understand steps.
First, we exclude companies involved in thermal coal and other specified businessactivities (controversial weapons and tobacco), as well as companies deemed noncompliant with the United Nations Global Compact (UNGC) principles (these set
minimum standards for human rights, labour, the environment and combating
corruption).
Then, we set the index constituents’ weights based on a scoring system for fossil
fuel reserves and operational carbon emissions: for companies with fossil fuelreserves, we progressively underweight those with higher reserve intensity; and we
progressively underweight those companies with a higher carbon emissions
intensity.
The index rules aim to shift the stock and sector weights of the starting index awayfrom more energy-intensive industrial and manufacturing businesses and towards
the technology, service and consumer-focused businesses that are likely to benefit
from the low-carbon transition.
To ensure diversification, the weight of any individual company is capped at 10percent and the aggregate weight of China A shares is capped at 20 percent.
The result of this construction approach is a low-carbon index offering exposure toaround 200 stocks in 11 developed and emerging Asia-Pacific economies.

FTSE Russell

3Client engagement | Client story

How the FTSE Asia Pacific Low Carbon Select index is built

FTSE Asia Pacific Index(c. 2000-2500 constituents)

ExclusionCompanies involved in controversial product and conduct categories areexcluded, including:
1.
2.
3.
4.

Controversial weapons
TobaccoThermal Coal
UN Global Company (UNGC) Controversies

Weighting Methodology
Companies with zero or lower fossil fuel reserves and those with lower carbon
emissions intensity will have higher index weights. For example, we areunderweighting companies with fossil fuel reservices, this is to reduce fossil fuelexposure in the index. For emissions, we are overwe3ighting companies withrelatively low emission intensity (more carbon efficient) and underweighting
companies with relatively high emissions intensity (less carbon efficient).

FTSE Asia Pacific Low Carbon Select Index

FTSE Russell

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ABOUT FTSE RUSSELL
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