Amundi has repurposed an existing ETF to provide socially responsible and fossil-fuel-free exposure to the broader UK equity market.
Amundi has refashioned its FTSE 100 ETF into a fossil-fuel-free socially responsible UK equity ETF.
The newly renamed Amundi MSCI UK IMI SRI UCITS ETF is available on the London Stock Exchange in GBP (FT1K LN) and on Euronext Paris in GBP (FTSE FP) and EUR (C1U FP). It comes with an expense ratio of 0.18%.
The fund has been created by recasting its subscale FTSE 100 ETF.
Amundi’s decision to discontinue its FTSE 100 offering likely reflects, in part, the fund’s failure to sustain meaningful levels of assets under management – fund assets stand at less than £10 million, down from a peak of only £40m in January 2017.
With the fund competing against blockbuster products from BlackRock and Vanguard – namely the £7.4 billion iShares Core FTSE 100 UCITS ETF (ISF LN) and the £2.7bn Vanguard FTSE 100 UCITS ETF (VUKE LN) – raising and maintaining assets was always going to be a tough ask.
The FTSE 100’s declining relevance as an index, arguably, and Amundi’s increasing positioning as a notable provider of ESG investments are also likely to have been motives for the repurposing.
Indeed, on this latter point, this is not the first time that Amundi has expanded its ESG capabilities by transforming an existing ETF – just two weeks ago, it switched its $980m physical S&P 500 ETF over to an ESG index.
Adopted index
The fund is linked to the MSCI UK IMI SRI Filtered Ex Fossil Fuels Index which is derived from the parent MSCI UK IMI Index universe. The universe currently covers 332 large-, mid-, and small-cap stocks listed in the United Kingdom.
Companies involved in nuclear power, tobacco, alcohol, gambling, military weapons, civilian firearms, genetically modified organisms, thermal coal, adult entertainment, fossil fuels, and oil and gas are all automatically excluded from the selection pool.
The index construction process then identifies and selects the companies with the highest ESG ratings, as calculated by MSCI, that constitute 50% of the free-float market capitalization of each GICS sector of the parent index, subject to a constituent weight cap of 5% and an ESG rating comparable to average or above.
The process results in an index – currently comprising 130 constituents – exhibiting favourable ESG characteristics while maintaining a risk profile that is broadly comparable to that of the parent index.
Early mover
The fund becomes only the second dedicated UK ESG equity ETF following the introduction of the HSBC UK Sustainable Equity UCITS ETF (HSUK LN) by HSBC Global Asset Management earlier this month. HSUK tracks the FTSE UK ESG Low Carbon Select Index and comes with an expense ratio of just 0.12%.
The HSBC fund is more concentrated, with just 64 holdings, and focused on larger capitalization companies.