The HSBC MSCI Japan Islamic ESG UCITS ETF (HIJP) and the HSBC FTSE EPRA Nareit Developed Islamic UCITS ETF (HINS) are listed on the London Stock Exchange with a total expense ratios of 0.30% and 0.35%, respectively.
HIJP tracks the MSCI Japan Islamic ESG Universal Screened Select index, which offers exposure to 44 large- and mid-cap Japanese companies reflecting Shariah investment principles.
ETFs With Shariah Exclusions
The index applies Shariah exclusions for companies involved in alcohol, gambling and pork-related products as well as climate-based exclusions. Screens are also applied screens based on financial ratios derived from total assets.
The resulting benchmark excludes the financials sector while awarding 29.6%, 23.8% and 20% weights to the industrials, information-technology and consumer-discretionary sectors, respectively.
HINS tracks the FTSE EPRA Nareit IdealRatings Developed Islamic index of Shariah compliant-listed real estate companies and real estate investment trusts in developed markets.
The starting universe is the FTSE EPRA Nareit Global Developed index built in partnership with the European Public Real Estate Association and the National Association of Real Estate Investment Trusts, which is then screened quarterly for Shariah compliance by IdealRatings for business and financial activities.
“These products look to service part of the population which invests according to a faith-based philosophy and there are currently very few instruments adhering to these values,” Olga de Tapia, global head of ETF and indexing sales at HSBC Asset Management, told ETF Stream.
“Until these ETFs, Japan and EPRA NAREIT were not covered at all in the passive space. We saw a gap and we are trying to provide access to all the building blocks for faith-based investors to construct their portfolios as they choose,” she said. “The target audience differs between country but in the U.K., France, Switzerland and Benelux, there is demand from pension schemes, wealth managers and family offices.”
ETFs Follow Sukuk Funds
The new products come as HSBC Asset Management builds out its Shariah-compliant line of products. The firm launched Europe’s first global sukuk ETF earlier in September.
Last November, ETF Stream revealed the firm had unveiled five Shariah-compliant ESG ETFs targeting different geographical exposures.