BNP Paribas Asset Management has launched a thematic ESG ETF investing in eurozone equities with robust biodiversity profiles.
Global biodiversity is in crisis, according to the WWF.
The BNP Paribas Easy ESG Eurozone Biodiversity Leaders PAB UCITS ETF has been listed on Euronext Paris (BIODV FP), Deutsche Boerse Xetra (ASRV GY), and Borsa Italiana (BIODV IM) in euros.
Biodiversity refers to the variety of living species including plants, bacteria, and animals within an ecosystem. According to the WWF, global biodiversity is in crisis, having declined by 60% over the past 40 years due to deforestation, land degradation, water and air pollution, hunting and harvesting, and climate change.
Amid a growing social and political movement to better protect the environment, companies that are negatively affecting biodiversity are expected to face a heightened risk of litigation as well as significant physical and transition costs.
Biodiversity-focused investment strategies are designed to help investors direct their capital in meaningful ways to mitigate these risks and make a positive impact on combatting the global biodiversity crisis.
The approach is relatively unexplored in the ETF industry with HSBC Asset Management introducing the first global biodiversity equity ETF in August, while AXA Investment Managers launched an actively managed global biodiversity ETF when it made its European ETF debut in early September.
BNP Paribas aims to stand apart from its competitors, however, by being the only of the three issuers to additionally align its biodiversity ETF with the carbon reduction goals of the Paris Agreement.
Denis Panel, Head of Multi-Asset, Quantitative, and Solutions at BNP Paribas Asset Management, said: “A quarter of the planet’s species are in danger of disappearing by 2050, and half of the world’s GDP is threatened by the progressive degradation of nature. This new ETF offers clients the opportunity to invest in companies whose potential impact on biodiversity is lower than that of their peers while adhering to strict requirements regarding the exclusion of fossil fuels and reducing carbon intensity. The launch reaffirms our position as the European leader in thematic ESG index management.”
Methodology
The fund is linked to the Euronext ESG Eurozone Biodiversity Leaders PAB Index which is constructed from the parent Euronext Eurozone 300 Index universe, a broad representation of the 300 largest companies listed in developed market countries belonging to the single currency bloc.
Violators of UN Global Compact principles, companies with ESG scores that rank in the bottom 20% of the parent universe, and firms that derive significant revenue from controversial sectors such as weapons, coal mining, uranium, shale gas, and tobacco production are removed.
The methodology then selects the firms with the most robust biodiversity profiles making up 30% of each ICB Supersector of the parent universe. Biodiversity scores are derived from Iceberg Data Lab’s ‘Corporate Biodiversity Footprint’ assessment which is based on four key pressure points – climate change, land use, air pollution, and water pollution.
The chosen constituents are then weighted using an optimization process that meets the requirements of EU Paris-Aligned Benchmarks. Specifically, the index delivers an immediate 50% reduction in weighted average carbon intensity compared to the parent universe as well as a further 10% annual decarbonization going forward, aligning with a trajectory to limit global warming to 1.5°C by 2050.
As of the end of June, stocks from France (35.7%), Germany (24.0%), and the Netherlands (21.1%) accounted for the largest country exposures followed by Italy (7.6%) and Spain (5.3%).
Notable sector allocations included consumer discretionary (18.9%), financials (17.9%), industrials (12.8%), technology (11.4%), and consumer staples (10.6%).
The largest single stock exposures were ASML (7.3%), L’Oreal (6.9%), Air Liquide (5.9%), Allianz SE (5.2%), and EssilorLuxottica (5.0%).
The fund comes with an expense ratio of 0.35% which matches the price tag of the HSBC World ESG Biodiversity Screened Equity UCITS ETF (HBDV LN). The AXA IM ACT Biodiversity Equity UCITS ETF (ABIT GY) costs 0.70%, however, due to its actively managed approach.
All three ETFs are classified as Article 9 products under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).