BNP Paribas Asset Management has unveiled the world’s first sustainable real estate ETF, the BNP Paribas Easy FTSE EPRA/NAREIT Developed Europe ex UK Green UCITS ETF, offering investors exposure to the most environmentally friendly REITS and real estate companies listed in developed Europe (ex UK).
Isabelle Bourcier, Head of Quantitative & Index, BNP Paribas Asset Management.
The fund has debuted on Euronext Paris (GREAL FP) and Xetra (EEPG GY) and is linked to the FTSE EPRA Nareit Developed Europe ex United Kingdom Green Index.
The index covers real estate companies listed on developed market continental European stock exchanges and aims to deliver notable improvements in climate and sustainable characteristics while minimising tracking error against its parent index.
To achieve this objective, the constituents of the parent universe, the FTSE EPRA Nareit Developed Europe ex UK ex UN Controversies Index, are assessed on two sustainability considerations: estimated energy usage per square metre and floor space covered by eligible green certification.
These assessments are then applied as tilts to adjust company weights to provide greater exposure to those securities with real estate investment portfolios and operations demonstrating stronger sustainability performance.
To assess the sustainability performance of the constituents, the index draws on building-by-building geolocation data mapping from specialist data provider GeoPhy. This data is then matched with green certification data and provides the basis for detailed energy use and carbon emissions modelling.
The index also applies a conduct-based exclusion in line with the United Nations Global Compact principles. This is performed at the preceding index level where companies deemed in breach of the UN’s principles on human rights, labour standards, the environment, and anti-corruption are removed from the wider developed Europe ex UK REIT universe.
The ETF is likely to appeal to investors seeking European real estate exposure but who wish to be consistent with an investment approach that incorporates environmental – according to UN estimates, buildings account for over half of global electricity usage and more than a quarter of global carbon emissions – social and governance considerations.
Commenting on the launch, Isabelle Bourcier, Head of Quantitative & Index, BNP Paribas Asset Management, said, “Listed real estate represents a compelling investment opportunity through a combination of yield enhancement, inflation hedge, liquidity and low correlation to other equity sectors and other asset classes. With the launch of this new ETF based on FTSE Russell’s green real estate index, we are building on our strong track record in this asset class by offering clients a new efficient exposure to listed real estate assets with sustainable considerations. We have already seen significant investor demand.”
Stéphane Degroote, Managing Director, FTSE Russell, added, “We have seen growing investor demand for innovative financial products that factor in climate risk and opportunities of late. Integrating climate risk in listed real estate is a major challenge for the transition to a more sustainable, low-carbon economy. FTSE Russell’s green real estate index series allows investors to gain exposure to a liquid market offering higher yields and a low correlation to broader equity markets, alongside driving the sustainability agenda of a low-carbon economy.”
The fund trades in euros and comes with annual ongoing charges of 0.40%. It has debuted with a very healthy €138 million in assets under management.