BNP Paribas builds out ESG euro credit ETF range

Nov 12th, 2019 | By | Category: Fixed Income

BNP Paribas Asset Management has listed a pair of ETFs providing exposure to euro-denominated corporate bonds from issuers with low carbon footprints and favourable environmental, social, and governance (ESG) characteristics.

BNP Paribas builds out suite of socially responsible euro credit ETFs

BNP Paribas’s latest funds complement a broad maturity version launched earlier this year.

The BNP Paribas Easy € Corp Bond SRI Fossil Free 1-3Y UCITS ETF (SRIC3 FP) provides exposure to bonds with remaining maturities of one to three years, while the BNP Paribas Easy € Corp Bond SRI Fossil Free 3-5Y UCITS ETF (SRIC5 FP) covers the three-to-five-year maturity segment.

The ETFs have been listed on Euronext Paris in euros and come to market with assets under management of €240m and €54m respectively. They are scheduled to cross-list on Deutsche Börse and Borsa Italiana.

The funds complement the BNP Paribas Easy € Corp Bond SRI Fossil Free UCITS ETF (SRIC FP), which launched in February 2019 and provides exposure to eligible bonds from across the yield curve.

All three ETFs are linked to Bloomberg Barclays MSCI Euro Corporate SRI Sustainable Reduced Fossil Fuel indices, which have been developed by Bloomberg Barclays in collaboration with MSCI.

The indices comprise euro-denominated, investment-grade bonds with amounts outstanding of at least €300 million.

The index methodology excludes issuers that do not respect UN Global Compact principles as well as those that are involved in sectors such as alcohol, gambling, pornography, tobacco, nuclear, genetically-modified organisms, and weapons, or those that have high levels of involvement in fossil fuels.

Issuers are further filtered by MSCI’s ESG Ratings division with only those commanding a ‘BBB’ rating or above making the cut (‘BBB’ corresponds to average). An issuer can move up MSCI’s ESG rating scale by strengthening employee rights, reducing levels of corruption and enhancing corporate governance structure. Similarly, it can advance its rating by not wasting resources, by promoting education, safeguarding animal rights and protecting the environment.

The bond issues that pass through this screening process and fall in line with the maturity bands form the constituents of the relevant index. They are weighted by the market value of debt outstanding.

The ETFs come with expense ratios of 0.20%.

Peers

BlackRock offers a couple of ETFs providing ESG-screened exposure to euro corporate bonds: iShares € Corp Bond ESG UCITS ETF (SUOE LN) and the iShares € Corp Bond 0-3 YR ESG UCITS ETF (SUSS LN).

These funds track Bloomberg Barclays Euro Corporate Sustainable SRI indices powered by a methodology almost identical to that described above except that it does not include an explicit screen for companies with high fossil fuel exposure. SUOE provides exposure to bonds from across the yield curve, while the SUSS targets bonds with less than three years remaining to maturity.

Each fund comes with an expense ratio of 0.18% and has between €700m and €900m in AUM.

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