BNP Paribas Asset Management has added to its lineup of Paris-aligned low-carbon ETFs with the launch of the BNP Paribas Easy Low Carbon 300 World PAB UCITS ETF.
Isabelle Bourcier, Head of Quantitative & Index Management at BNP Paribas Asset Management.
Listed on Euronext Paris (LCWLD FP) and Xetra (LOWD GY), the fund provides equity exposure to a selection of global companies that have been selected and weighted to achieve compliance with the climate-change goals of the Paris agreement.
The fund is referenced to the Euronext Low Carbon 300 World PAB NTR Index, an index managed by exchange operator and index provider Euronext.
The index is composed of 300 equities identified according to environmental, social and governance (ESG) criteria with a particular emphasis on climate rating.
Constituents are selected from an initial universe comprising the 900 largest publicly listed, developed market companies in terms of free-float market capitalization.
From this initial universe, various stocks are excluded including the 90 worst performers in terms of social and governance score; companies that are in violation of the principles of the UN Global Compact; companies that are classified in the tobacco, defence, aerospace and oil equipment & services sectors; companies with fossil-fuel or controversial weapons-related activities, and companies with serious ESG controversies.
Euronext taps the expertise of ESG specialists Vigeo Eiris to determine which stocks to exclude, with this preliminary part of the index construction process specifically targeting the exclusion of at least 20% of the securities from the initial universe.
Euronext then proactively selects up to 45 companies from the remaining pool whose activities are explicitly linked to the clean energy transition for which at least 50% of their turnover is linked to low-carbon technologies (renewable energies or energy efficiency). The companies secure their place in the index.
The remaining securities selected to form the index are those with the highest climate scores in their respective sectors, according to data from third-party partners, principally Vigeo Eiris. Three hundred securities are selected in total, which includes the circa 45 (max) companies identified as being direct providers of low-carbon technologies involved in the energy transition effort.
The 300 constituents are then weighted by an algorithm (subject to various constraints such as a 10% weight cap on securities) that ensures consistency with the objectives of the EU’s Paris Aligned Benchmark (PAB) criteria, namely a reduction in the index’s carbon intensity relative to the initial universe by at least 50% and an annual decarbonisation target of 7%.
The composition of the index is reviewed on a yearly basis.
Commenting on the launch, Isabelle Bourcier, Head of Quantitative & Index Management at BNPP AM, said: “The increasing awareness of climate issues among savers, coupled with regulatory changes, is generating high expectations on their part, which is why we have chosen to expand the geographical exposure of our low carbon index offering internationally.
“With the launch of this ETF, BNPP AM is affirming its leadership in thematic index solutions, and is expanding its range, which already includes index funds and ETFs on the themes of the circular economy (2019), blue economy (2020) and ESG infrastructure (2020).”
Given its specific sustainable objective, the fund is classified as Article 9 according to the Sustainable Finance Disclosure Regulation (SFDR).
It comes with a total expense ratio of 0.30%.
The fund will line up against other Paris-aligned world equity ETFs including the $250 million Amundi MSCI World Climate Paris Aligned PAB UCITS ETF DR listed on Euronext Paris (PABW FP), Xetra (PABW GY) and LSE (PABW LN); the $63m Lyxor Net Zero 2050 S&P World Climate PAB (DR) UCITS ETF listed on LSE (GPAB LN), Euronext (GPAB FP), Borsa Italiana (PABWD IM), SIX Swiss Exchange (GPAB SW), and Xetra (EABG GY); the $15m iShares MSCI World Paris-Aligned Climate UCITS ETF listed on Euronext Amsterdam (WPAB NA); and the $13m UBS MSCI World Climate Paris Aligned UCITS ETF listed on SIX Swiss Exchange (WOPA SW), Borsa Italiana (WOPA IM), and Xetra (AW10 GY).
The Lyxor, BlackRock and UBS funds have TERs of 0.20% while the Amundi product comes in at 0.25%.