{
    "ucits": true,
    "type": "ETF",
    "leverage": false,
    "derivatives": true,
    "swaps": true,
    "inverse": false,
    "replication_method": "synthetic",
    "complex_factors": "Use of total return swaps, exposure to structured products like CLOs, synthetic replication, counterparty and collateral risk",
    "classification": "complex",
    "supporting_data": "The HSBC FTSE EPRA NAREIT DEVELOPED CLIMATE PARIS ALIGNED UCITS ETF is a UCITS-compliant ETF that aims to track the FTSE EPRA Nareit Developed Green EU PAB Index. It may invest up to 10% of its assets in total return swaps and contracts for difference, with derivative use not expected to exceed 5%. The ETF uses synthetic replication methods involving derivatives integral to achieving its investment objective. This introduces counterparty risk and collateral risk, which are complex features under MiFID II. The ETF also engages in securities lending up to 30% of assets, which adds counterparty risk but is managed within UCITS rules. The replication method is synthetic, relying on derivatives rather than physical holdings, increasing complexity. According to MiFID II Article 254 and Delegated Regulation EU 2017/565 Article 57, ETFs using synthetic replication and derivatives integral to the strategy are classified as complex because retail investors with basic knowledge may not easily understand the risks such as counterparty default or collateral insufficiency. The presence of structured products like CLOs, which embed derivatives and have complex payout structures, further supports the complex classification. The ETF does not use significant leverage beyond UCITS limits, but the derivative use and synthetic replication are sufficient to classify it as complex. The ETFu2019s structure and risks require advanced understanding beyond basic retail investor knowledge, fulfilling the criteria for complexity under MiFID II. Therefore, despite being a UCITS ETF, the use of derivatives for synthetic replication and exposure to structured products leads to a complex classification requiring appropriateness assessment for retail investors.",
    "final_assessment": "Complex"
}