BNP Paribas Asset Management has launched an ESG-enhanced global equity ETF that adheres to the carbon reduction objectives outlined in the Paris Agreement.
BNP Paribas has launched a Paris-aligned global equity ETF.
The BNP Paribas Easy MSCI ACWI SRI S-Series PAB 5% Capped UCITS ETF has been listed on Euronext Paris (EUR: PAACE FP; USD PAACU FP), Borsa Italiana (EUR: PAACE IM), and SIX Swiss Exchange (USD: PAACU SW).
The fund is also expected to be rolled out on Deutsche Börse Xetra (EUR: ESAB GY; USD: ESAC GY) later this week.
The ETF tracks the MSCI ACWI SRI S-Series PAB 5% Capped Index which is based on the parent MSCI ACWI Index, a broad market benchmark capturing the performance of large and mid-cap equities in developed and emerging market countries worldwide, covering approximately 85% of the float-adjusted market capitalization within each country.
Companies embroiled in severe ESG-related controversies as well as firms with business operations linked to weapons, tobacco, adult entertainment, alcohol, gambling, genetically modified organisms, stem cells, nuclear power, and fossil fuels are excluded.
The remaining constituents are assigned an ESG score on a seven-point scale, ranging from AAA to CCC, based on the most relevant ESG factors for their industry and risk exposure. Only firms with ratings of ‘A’ (upper average) and above are eligible for inclusion.
From these, companies with the highest ESG ratings are selected for index inclusion, aiming to maintain 25% of the free float-adjusted market capitalization within each GICS sector of the parent index. This methodology is applied to various sub-indices of the parent index, categorized by economic classification (developed or emerging markets) and region (Americas, Europe & the Middle East, and Asia Pacific). These sub-indices are then aggregated to form the final index.
MSCI then applies its Paris-Aligned methodology by weighting the chosen constituents so as to deliver an immediate 50% reduction in weighted-average carbon intensity as well as a further 10% annual decarbonization going forward. These conditions satisfy the Paris-aligned Benchmark (PAB) requirement, aligning the strategy with a trajectory to limit global warming to 1.5°C by 2050.
According to BNP Paribas, the ETF commits to invest a minimum of 35% of its net assets in sustainable investments while also aiming to maintain a tracking error below 1% versus the parent universe.
The ETF comes with an expense ratio of 0.20% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).