Invesco has launched what it believes to be the first sterling corporate bond ETF in Europe that incorporates ESG criteria.
Listed on the London Stock Exchange, the Invesco GBP Corporate Bond ESG UCITS ETF will track the performance of the Bloomberg Barclays MSCI Sterling Liquid Corporate ESG Weighted Bond Index, net of fees.
Constituents of this index are sterling-denominated investment grade, fixed-rate securities based in developed markets. Invesco said the index seeks exposure to issuers demonstrating a robust ESG profile and excludes any company involved in tobacco, thermal coal, oil sands, civilian firearms or military weapons.
Paul Syms, head of ETF fixed income product management at Invesco, said: “Income investors continue to struggle for decent yield and, up until now, finding an attractive yield with ESG considerations factored into the product has been tough.
“The index this ETF follows has been designed to offer a higher ESG score than the broad corporate bond market, but with similar sector exposures, credit ratings and risk characteristics. As a result, we would expect the ETF to provide similar yield, duration and overall performance that investors would receive from a broad index.”
The group highlighted ETFs with an ESG theme more than doubled their AUM in 2019 as a result of net inflows, but 80% of this was into equity mandates.
Ben Seager-Scott, head of multi-asset funds at Tilney, said fixed income ESG products is an area that does need developing: “As interest in ESG investing continues to accelerate, much attention has turned to fixed income, which is somewhat underserved relative to the equity fund space, but given most multi-asset portfolios will have some fixed income exposure, it is an important area to develop.
“Of course, developing ESG strategies in fixed income has the same challenges as with equities, particularly around investment criteria and where investors sit on the ‘light-green’ to ‘dark-green’ spectrum, but it is good to see Invesco launch a competitively-price product in this area, and I think there will likely be significant demand.”
The index is rebalanced monthly and the ETF carries an ongoing charges figure of 0.10%.