Amundi has introduced a new range of ETFs that help tackle climate change by tracking low carbon indices designed in accordance with the Paris Agreement – a framework to limit global warming to below 2°C.
Fannie Wurtz, Head of Amundi ETF, Indexing and Smart Beta.
The range consists of three ETFs that provide exposure to European, eurozone, and global developed equity markets.
The Amundi MSCI Europe Climate Paris Aligned PAB UCITS ETF (PABE FP) and Amundi Euro iStoxx Climate Paris Aligned PAB UCITS ETF (PABZ FP) have listed on Euronext Paris and come with expense ratios of 0.18%.
The Amundi MSCI World Climate Paris Aligned PAB UCITS ETF is expected to list in the near future and will cost 0.25%.
The funds are linked to ‘EU Paris-Aligned Benchmarks’ which aim to reallocate capital towards a low-carbon and climate-resilient economy.
The European and global developed ETFs track MSCI Climate Change Paris-Aligned indices that are based upon the parent MSCI Europe and MSCI World indices, respectively. The parent indices consist of large- and mid-cap stocks from their respective universes.
The eurozone ETF, however, tracks the Euro iStoxx Ambition Climat PAB Index, from Qontigo’s indexing division Stoxx. The index is based on the parent Euro Stoxx Index which covers large-, mid-, and small-caps across 11 eurozone countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Each of the three Paris-aligned indices first screens out unwanted companies from less desirable industries. The exclusion criteria are broadly similar between the MSCI and Stoxx indices and covers firms with activities related to controversial weapons, tobacco, coal, and fossil fuels. Additionally, companies that are non-compliant with international ESG standards such as the United Nations Global Compact Principles are also removed.
An optimization process then reweights the remaining constituents so as to reduce the total carbon intensity of the indices by 50%, instantly aligning them with the Paris Accord objective to cut emissions by 50% by 2030. The optimization process also seeks to minimize the deviations in constituent weights relative to the parent universe. Furthermore, each index strives for at least a 7% annual decarbonization moving forward.
The new launches complement a further two climate change ETFs offered by Amundi that also target European and global developed equity markets.
The Amundi Index MSCI Europe Climate Change UCITS ETF (LWCE FP) and the Amundi Index MSCI Global Climate Change UCITS ETF (LWCR FP) were recently repurposed to track MSCI Climate Change indices that reweight constituents based on MSCI’s Low Carbon transition score. The score measures a company’s exposure to low carbon transition risk, carbon emissions, and fossil fuel reserves, as well as its exposure to opportunities including alternative energy and clean-technology.
Fannie Wurtz, Head of Amundi ETF, Indexing and Smart Beta, said: “The creation of the new Climate benchmarks by the European Union supports our long-held belief that index management has a critical role to play in accelerating adoption of responsible investing and the delivery of climate objectives; putting the power in index investors’ hands.
“We believe in offering investors simple and ready-to-use tools that will help them implement their ESG and climate strategy depending on their objectives and constraints. Expanding our toolbox with cost-effective, climate-positive ETFs provides investors with additional opportunities to translate their goals and beliefs into investment strategy.”
Climate-change strategies have been a hot spot for ETF launches lately. French rival Lyxor has only very recently unveiled a suite of Paris-aligned equity ETFs, with expense ratios of 0.20%, while HSBC GAM began rolling out ETFs in June that combine ESG and low carbon methodologies.