BNP Paribas Asset Management has launched three new ESG fixed income ETFs providing exposure to eurozone government, emerging market government, and euro high-yield issuers.
Isabelle Bourcier, Head of Quantitative & Index Management, BNP Paribas Asset Management.
The BNP Paribas Easy JPM ESG EMU Government Bond IG 3-5 Year UCITS ETF, BNP Paribas Easy JPM ESG EMBI Global Diversified Composite UCITS ETF, and BNP Paribas Easy EUR High Yield SRI Fossil Free UCITS ETF have all listed on Euronext Paris.
The funds’ socially responsible design ensures that they avoid exposure to companies that are violators of UN Global Compact principles and, depending on the underlying index, firms that are involved in controversial areas such as civilian firearms, military weapons, tobacco, or fossil fuels.
BNP Paribas now offers six sustainable fixed income ETFs. The other three collectively house €2.5 billion in assets and provide exposure to different segments (1-3 year, 3-5 year, and all-duration) of the euro credit market.
Isabelle Bourcier, Head of Quantitative & Index Management at BNP Paribas Asset Management, commented: “These fund launches are part of a dual approach of developing our ESG offering and our fixed income index range. We are maintaining the momentum within our responsible offering in line with the expectations of our institutional and retail clients.”
Eurozone government
The BNP Paribas Easy JPM ESG EMU Government Bond IG 3-5 Year UCITS ETF tracks the JP Morgan ESG EMU Government Bond IG 3- 5 Year Index.
The index consists of fixed-rate and zero-coupon government bonds issued by Austria, Belgium, Finland, France, Germany, Ireland, Italy, Netherlands, Portugal, and Spain. Eligible issues must be rated investment-grade and have a remaining time to maturity between three and five years.
JP Morgan harnesses data from Sustainalytics, RepRisk, and the Climate Bonds Initiative to overweight green bond issues or issuers ranked higher on ESG criteria, and to underweight or remove issuers that rank lower.
A country’s ESG rank reflects a mix of qualitative and quantitative analysis including values-based screening, such as participation in controversial weapons and thermal coal; norms-based screening, such as evidence of illegal activities, human rights violations, and disregard for UN Global Compact principles; and positive screening, which rewards countries with robust ESG business practices.
The fund comes with an expense ratio of 0.15%.
Emerging markets government
The BNP Paribas Easy JPM ESG EMBI Global Diversified Composite UCITS ETF is also linked to a JP Morgan index – the JP Morgan ESG EMBI Global Diversified Index. This index applies the same ESG methodology as above on a universe of fixed and floating-rate debt instruments denominated in US dollars and issued by sovereign and quasi-sovereign emerging market issuers.
Whole countries can be removed from the index universe if their Gross National Income per capita is above JP Morgan’s Index Income Ceiling or if its long-term foreign currency sovereign credit rating is “A-“ or above for three consecutive years.
The fund comes with an expense ratio of 0.25%.
Euro high yield
The BNP Paribas Easy EUR High Yield SRI Fossil Free UCITS ETF tracks the Bloomberg-Barclays MSCI Euro High Yield SRI Sustainable Ex Fossil Fuel Index, an index jointly developed by Bloomberg and MSCI.
Construction is based upon the parent Bloomberg Barclays Euro Corporate High Yield Index universe which covers euro-denominated high-yield bonds from developed market corporate issuers operating in the industrial, financial, and utility sectors.
The index first screens out issuers embroiled in severe ESG-related controversies, those with substantial revenue derived from adult entertainment, alcohol, gambling, tobacco, controversial and military weapons, civilian firearms, nuclear power, and genetically modified organisms, as well as any firm with ties to fossil fuels.
The remaining issuers are each then assigned an ESG rating from MSCI based on a seven-point scale from ‘AAA’ to ‘CCC’, according to how the issuer manages key ESG risks relative to industry peers. A minimum rating of BBB is required to be included in the index.
Constituents are weighted by market value outstanding, and the index is rebalanced on a monthly basis.
The fund comes with an expense ratio of 0.35%.