BNP Paribas Asset Management has introduced its first actively managed ETFs with the launch of two socially responsible fixed income funds.

Marie-Sophie Pastant, Head of Index & ETF Strategies – Portfolio Management at BNP Paribas Asset Management.

The BNP Paribas Easy Sustainable EUR Corporate Bond ETF and BNP Paribas Easy Sustainable EUR Government Bond ETF provide diversified exposure to euro-denominated corporate and government bonds, respectively.

The funds adopt an ‘index-like’ strategy, mirroring the characteristics of broad market benchmarks while incorporating BNP Paribas’s advanced environmental, social, and governance (ESG) criteria for a superior sustainability profile.

This approach includes excluding certain industries, utilizing a bespoke scoring system to evaluate a company’s ESG risks against its industry counterparts, and engaging actively with company management to promote ESG improvements.

These ETFs aim not just to sidestep issuers with poor ESG scores, but also to construct portfolios whose weighted-average ESG scores surpass set thresholds.

BNP Paribas suggests these funds could serve as substitutes for segments of investors’ core fixed income holdings, offering ESG-enhanced options that are designed to be adaptable to impending regulatory shifts.

Marie-Sophie Pastant, Head of Index & ETF Strategies – Portfolio Management at BNP Paribas Asset Management, commented: “This new range combines our bespoke sustainable methodology with our indexing expertise. It will enable us to react promptly to any controversies without needing to wait for the next index rebalancing and to respond rapidly to the changing environment. This will allow us to comply more easily with the different sustainability label criteria.”

Lorraine Sereyjol-Garros, Global Head of Development for ETFs & Index Funds at BNP Paribas Asset Management, added: “Fixed income will be a big focus for investors looking to navigate a challenging market environment in 2024.  For those rethinking fixed income in their portfolios, active ESG fixed income management through an ETF structure provides investors with diversification, sound sustainable credentials, and an affordable, convenient approach to portfolio construction.”

EUR Corporate

The BNP Paribas Easy Sustainable EUR Corporate Bond ETF will maintain a tracking error below 0.50% relative to the Bloomberg Euro Aggregate Corporate Index which consists of fixed-rate, euro-denominated, investment-grade bonds issued by corporate issuers globally. Eligible securities must have minimum par amounts outstanding of at least €300m. The index currently has an average duration of approximately 4.4 years.

The ETF has been listed on Deutsche Börse Xetra (Cap: BJLN GY; Dist: BJLP GY) and Borsa Italiana (SEUCB IM) in euros. It comes with an expense ratio of 0.25% and is classified as an Article 9 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR) due to the fund having a 100% allocation to sustainable investments.

EUR Government

The BNP Paribas Easy Sustainable EUR Government Bond ETF, meanwhile, will maintain a tracking error of less than 0.25% relative to the J.P. Morgan EMU investment Grade Index which consists of fixed-rate, euro-denominated, investment-grade debt issued by government entities in the eurozone. Eligible issues must have a minimum €1 billion par amount outstanding. The index currently has an average duration of approximately 7.1 years.

The ETF is also available on Xetra (Cap: BJLM GY; Dist: BJLQ GY) and Borsa Italiana (SEUGB IM) in euros. It comes with an expense ratio of 0.18% and is classified Article 8 under SFDR with a targeted allocation of at least 30% to sustainable investments.

BNP Paribas’ fixed income ETF range includes 14 funds covering sovereign bonds, investment-grade and high yield corporate credit, and green, social, and sustainability-linked bonds. The entire line-up is classified as either Article 8 or Article 9 under SFDR.