In response to the growing demand for sustainable investment options, BNP Paribas Asset Management has launched two new ESG-tailored ETFs focused on short-duration EUR and broad-maturity USD corporate bond markets.
Lorraine Sereyjol-Garros, Global Head of Development for ETFs & Index Funds at BNP Paribas Asset Management.
The newly launched funds, the BNP Paribas Easy € Corp Bond SRI Fossil Free Ultrashort Duration UCITS ETF (SRIUC) and BNP Paribas Easy USD Corp Bond SRI Fossil Free UCITS ETF (USCBC), are both compliant with Article 8 standards of the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
The first of these funds, the BNP Paribas Easy € Corp Bond SRI Fossil Free Ultrashort Duration UCITS ETF, is designed as an ultra-short duration responsible investment strategy focused on euro-denominated securities from corporate issuers worldwide.
The underlying Bloomberg MSCI Euro Corporate Ultrashort Fixed and Floating Rate SRI Index consists of approximately 400 constituents and exhibits very low interest rate risk with an effective duration of just 0.7 years.
Eligible issues include fixed and floating-rate securities with investment-grade ratings and a minimum par amount outstanding of €300 million.
Notably, the index construction adheres to MSCI’s rigorous sustainability criteria, encompassing values-based, controversial sectors, and fossil fuel exclusions, as well as the elimination of firms embroiled in ‘red flag’ ESG controversies.
The second addition to BNP Paribas’ sustainable offerings, the BNP Paribas Easy USD Corp Bond SRI Fossil Free UCITS ETF, replicates the Bloomberg MSCI US Corporate SRI Sustainable ex Fossil Fuel Bond Index.
This investment grade bond index includes around 3,400 constituents, covering US dollar-denominated corporate bonds from across the maturity spectrum – the index’s effective duration is currently 6.8 years. Eligible issues must be fixed-rate with a minimum par amount outstanding of $500 million.
Mirroring the commitment to sustainability, the index is crafted using MSCI’s criteria on values-based, controversial sectors, fossil fuel, and ‘red flag’ ESG controversy exclusions. Additionally, issuers must obtain a minimum overall ESG rating of ‘BBB’, considered average on MSCI’s seven-point scale of ESG ratings, to be eligible for inclusion.
The ETFs have been listed on Euronext Paris, Borsa Italiana, and Deutsche Börse Xetra with expense ratios of 0.10% and 0.20% for the short-duration EUR and broad-maturity USD funds, respectively.
Lorraine Sereyjol-Garros, Global Head of Development for ETFs & Index Funds at BNP Paribas Asset Management, said: “Interest in fixed income ETFs has continued to gain momentum through the course of 2023, building on the strong growth seen last year when assets under management rose by almost one third.
“We launched our first ESG fixed income ETF in 2019, and have continued to expand our range ever since as we seek to meet growing investor demand for systematic fixed income exposure based on an ESG approach. These two new fossil-free funds offer investors additional asset allocation building blocks targeting low levels of tracking error relative to those of non-ESG benchmarks.”