Franklin Templeton has expanded its suite of Paris-aligned equity ETFs in Europe with a new fund targeting stocks listed in emerging markets.
Caroline Baron, Head of ETF Distribution, EMEA, Franklin Templeton.
The Franklin MSCI Emerging Markets Paris Aligned Climate UCITS ETF has been listed on London Stock Exchange in US dollars (PABE LN) and pound sterling (EMPR LN) as well as on Deutsche Börse Xetra (FVEM GY) and Borsa Italiana (FREP IM) in euros.
The fund is linked to the MSCI Emerging Markets Climate Paris Aligned Index which is based on the headline MSCI Emerging Markets Index universe covering large and mid-cap stocks across 24 developing countries.
MSCI’s ‘Climate Paris Aligned’ indices aim to maintain broad exposure to their parent universes while managing risks and pursuing opportunities arising from the transition to a low-carbon economy.
The methodology first removes companies embroiled in severe ESG-related controversies as well as firms with business operations linked to weapons, tobacco, thermal coal, oil & gas, or oil sands.
The remaining securities are then weighted based on the risks and opportunities associated with the climate transition. MSCI harnesses a diverse range of data and analytical tools to aid in index construction including scope 1, 2, and 3 carbon emissions, green revenues, and the index provider’s own proprietary low carbon transition score and climate value-at-risk measures.
The index offers an immediate 50% reduction in weighted average carbon intensity relative to its parent universe as well as a further 10% annual decarbonization going forward, aligning with a trajectory to limit global warming to 1.5°C above pre-industrial levels by 2050.
In addition to the above primary objectives, the weighting process aims to achieve secondary objectives such as maximizing exposure to sustainable energy providers, increasing the weight of companies with clear carbon reduction targets, minimizing fossil fuel exposure, reducing climate value-at-risk by 50%, and maintaining a modest tracking error relative to the parent universe.
The fund comes with an expense ratio of 0.18%.
Franklin Templeton offers a further three Paris-aligned ETFs targeting US (based on the parent S&P 500), European (STOXX Europe 600), and Chinese (MSCI China) equities.
All four ETFs are classified as Article 8 products under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
Commenting on the new listing, Caroline Baron, Head of ETF Distribution, EMEA, Franklin Templeton, said: “We are delighted to add this new ETF to our comprehensive suite of Paris Aligned Climate ETFs which will help investors across Europe transition their assets in line with the Paris Accord. Providing access to distinct opportunities in emerging markets at a competitive fee, this ETF reduces climate risk exposure by investing in companies providing solutions to mitigate climate change as well as those improving their resilience to its consequences, giving them a long-term competitive advantage.”
Rafaelle Lennox, Head of UCITS ETF Product Strategy, Franklin Templeton, added: “Just like our first Paris Aligned ETFs that we launched in 2020, we have selected a key emerging markets benchmark utilized by our clients, the MSCI Emerging Markets Index. With this ETF tracking the MSCI Emerging Market Climate Paris Aligned Index, our investors will be able to align their core emerging market equity holdings to the Paris Climate Agreement, and thus reduce their exposure to climate change risks as well as capture opportunities related to the low carbon transition.”