BNP Paribas launches socially responsible euro credit ETF

Feb 19th, 2019 | By | Category: Fixed Income

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BNP Paribas Asset Management has launched the BNP Paribas Easy € Corp Bond SRI Fossil Free UCITS ETF (SRIC FP) on Euronext Paris, providing low carbon exposure to around 400 euro-denominated corporate bonds selected using environmental, social, and governance (ESG) criteria.

BNP Paribas launches socially responsible euro credit ETF

The fund provides low carbon, ESG-screened exposure to a portfolio of euro-denominated, investment grade corporate bonds.

Isabelle Bourcier, Global Head of Quantitative & Index at BNP Paribas Asset Management, commented, “The launch of BNP Paribas Easy € Corp Bond SRI Fossil Free UCITS ETF is part of a dual approach to developing our low carbon footprint SRI offering and our bond index range.  At the end of December 2018, we managed €1.9 billion in ESG index funds.”

The fund is linked to the Bloomberg Barclays MSCI Euro Corporate SRI Sustainable Reduced Fossil Fuel Index, an index developed by Bloomberg Barclays and MSCI‘s ESG unit.

The starting universe for the index is the Bloomberg Barclays Euro Corporate Index which includes euro-denominated, investment grade bonds with maturities greater than one year and amounts outstanding of at least €300 million.

The methodology then excludes issuers that do not respect UN Global Compact principles as well as those companies that are involved in sectors such as alcohol, gambling, pornography, tobacco, nuclear, genetically-modified organisms, and weapons.

Companies are then further analyzed according to their MSCI ESG scores with only those scoring ‘BBB’ (average) or higher making the cut – a firm scores higher on the scale if it has strong employee rights, low levels of corruption, and a strong corporate governance structure. It also ranks well if it does not waste resources, it promotes education, safeguards animal rights and protects the environment.

In addition, the index eliminates from selection those firms with a high level of involvement in fossil fuels, and remaining constituents are weighted by market value to arrive at the final index.

The fund comes with a total expense ratio (TER) of 0.20%. It is due to be cross-listed on Deutsche Börse Xetra on 26 February 2019 under the ticker ASRI GR.

Investors looking for ESG-screened exposure to euro corporate bonds may also wish to consider ETFs from BlackRock and UBS.

The iShares € Corp Bond SRI UCITS ETF tracks the Bloomberg Barclays Euro Corporate Sustainable SRI Index which is virtually identical to the index underlying the new BNP Paribas ETF except that it does not include an explicit screening for companies with high fossil fuel exposure. The iShares ETF comes with a TER of 0.18% and has some €70m in assets under management. It is available to trade on London Stock Exchange in euros (Ticker: SUOE LN).

Alternatively, the UBS Bloomberg Barclays MSCI Euro Area Liquid Corporates Sustainable UCITS ETF (UIMC GY) conducts the same methodology as the iShares fund but only within the universe of euro-denominated corporate bonds from eurozone issuers. Its TER is also 0.20%, and it houses €110m in AUM. It is available to trade on Deutsche Börse, Borsa Italiana, and SIX Swiss Exchange in euros, as well as on London Stock Exchange in pound sterling.

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