BNP Paribas Asset Management has announced changes to two of its existing ETFs in a move that aligns the funds with a socially responsible investment approach.
Isabelle Bourcier, Head of Quantitative & Index, BNP Paribas Asset Management.
The ETFs, which provide exposure to global infrastructure and European small-cap stocks, will switch to new indices that screen and select applicable constituents according to environmental, social, and governance (ESG) criteria.
The shake-up is effective immediately with the funds adopting new names to reflect their updated mandates.
Following the changes, the funds are the first ETFs within their market segments to incorporate an ESG dimension.
Isabelle Bourcier, Head of Quantitative and Index Management at BNP Paribas Asset Management, commented, “BNP Paribas Asset Management continues to improve its fund range in terms of sustainable investment and confirms its leading position as ESG ETF provider in Europe. We pioneered the launch of responsible ETFs, particularly with the launch of the first low carbon ETFs as early as 2008, on the circular economy in 2019, and on responsible listed real estate in 2019.
“Our clients increasingly want to integrate a responsible approach into their investments, which is how we are adapting our range. This ambition is fully in line with our Global Sustainability Strategy.”
Infrastructure
The BNP Paribas Easy ECPI Global ESG Infrastructure Equity UCITS ETF is a reincarnation of the BNP Paribas Easy NMX 30 Infrastructure Global UCITS ETF.
The ETF previously tracked the NMX 30 Infrastructure Global TR Index, which covers the 30 largest companies operating in the global infrastructure sector. It is now linked to the ECPI Global ESG Infrastructure (EUR) NR Index.
The new index was created by ECPI, a Milan-headquartered ESG indexing and research group that is also the index provider behind BNP Paribas’s global circular economy ETF which launched in May 2019.
The index universe covers developed market companies with market capitalizations above €500 million and average daily trading volumes of €5m that operate within the communication, energy, transport, waste management, water, and social segments of the infrastructure sector.
Eligible companies are then assigned an ESG score (on a nine-point scale from EEE+ to F) based on ECPI’s proprietary rating system that considers financial and extra-financial criteria. Stocks must be ranked higher than E- (second-worst) to be eligible for selection. Additionally, any firm with significant operations linked to armaments, tobacco, or oil & gas will be excluded.
The index selects the 100 largest eligible companies for inclusion in the index while maintaining suitable diversification across the six segments of the infrastructure market.
The fund comes with an expense ratio of 0.60% and is listed in euros on Euronext Paris (ENG FP), Xetra (XU61 GR), and Borsa Italiana (EENG IM). Income is accumulated within the portfolio.
European small-caps
The second refurbished fund is the BNP Paribas Easy MSCI Europe Small Caps SRI S Series 5% Capped UCITS ETF which used to be the BNP Paribas Easy MSCI Europe Small Caps ex Controversial Weapons UCITS ETF.
The fund previously tracked the MSCI Europe Small Caps ex Controversial Weapons NTR Index but is now linked to the MSCI Europe Small Caps SRI S-Series 5% Capped Index. Constituent selection is based on data from MSCI ESG Research, the world’s largest provider of ESG ratings.
The parent MSCI Europe Small Cap Index, representing 964 small-cap firms across 15 developed markets in Europe, is first screened to remove companies involved with controversial weapons, civilian firearms, nuclear weapons, tobacco, alcohol, adult entertainment, conventional weapons, gambling, genetically modified organisms, nuclear power, and thermal coal.
The remaining constituents are then assigned an ESG rating which indicates its ability to deal with ESG risks relative to sector peers. Firms with ratings below average are excluded.
The process then seeks to form a best-in-class index with risk characteristics that are similar to the parent universe. It does this by selecting companies from each sector with the highest ESG ratings that make up approximately 25% of the total market capitalization of that sector. Stocks are weighted by free float-adjusted market capitalization, subject to a 5% cap.
The fund comes with an expense ratio of 0.25% and is listed in euros on Euronext Paris (SRIE FP), Xetra (EESM GR), and Borsa Italiana (EESM IM). Income is also accumulated within the portfolio.