BMO Asset Management has expanded its range of socially responsible fixed income ETFs in Canada with the launch of a new fund targeting the US dollar high-yield corporate bond market.
Mark Raes, Head of Product, BMO Global Asset Management.
The BMO ESG High Yield US Corporate Bond Index ETF has listed on the Toronto Stock Exchange, tradeable in Canadian dollars (ESGH CN) It is also available in a USD-hedged share class (ESGH.F CN).
The fund comes with an estimated management expense ratio of 0.51%. Distributions are sent to investors on a monthly basis.
Methodology
The ETF is linked to the Bloomberg Barclays MSCI US High Yield Liquid Corporate Sustainability SRI Index which is based on the Bloomberg Barclays US High Yield Corporate Index universe.
The parent universe consists of US dollar-denominated, non-investment-grade bonds from corporate issuers in the industrial, financial, and utility sectors. Fixed-rate, original zero-coupon, and option-embedded bonds are all eligible for inclusion as long as they have at least $500 million outstanding and a remaining time to maturity greater than one year.
The ESG methodology first screens out issuers with substantial revenue derived from adult entertainment, alcohol, gambling, tobacco, controversial military weapons, civilian firearms, nuclear power, genetically modified organisms, thermal coal, and unconventional oil and gas.
The remaining issuers are then assigned ESG ratings using in-house analytics from MSCI, with the index provider using a seven-point scale from ‘AAA’ to ‘CCC’ based on how the company manages key issues relative to industry peers. A minimum MSCI ESG rating of BBB (equivalent to ‘average’) is required to be included in the index. Constituents are weighted by market value outstanding subject to a single issuer cap of 2%.
BMO’s roster of ESG fixed income ETFs also includes funds targeting investment-grade bonds from Canadian or US corporate issuers, while its equity ESG ETF line-up covers Canadian, US, global, and EAFE exposures.
Mark Raes, Head of Product, BMO Global Asset Management, commented: “At BMO Global Asset Management, we continue to advance our ESG ETF line-up to meet the demands of investors. Adding a US high yield offering allows investors to further integrate ESG into their portfolios.”