Franklin Templeton has introduced a new global equity ETF in Europe providing ESG-enhanced and low-carbon exposure to companies that are aligned with Catholic values.
The ETF adheres to Christian values in its investment approach.
The Franklin MSCI World Catholic Principles UCITS ETF has been listed on London Stock Exchange in US dollars (FIDE LN) as well as on Xetra (FLXA GY) in euros.
A further listing on Borsa Italiana (FAITH IM) in euros is expected later this month.
The fund is linked to the MSCI World Select Catholic Principles ESG Universal and Low Carbon Index which is based on the parent MSCI World universe of large and mid-cap stocks listed across 23 developed market countries globally. The initial universe covers approximately 85% of the investable market cap within each eligible country.
To factor in a low carbon approach, constituents in the parent universe are ranked by carbon emissions and the top 20% of securities, by number, are removed while limiting the cumulative weight of securities excluded from any specific sector to less than 30% of that sector’s weight in the parent index. If this sector weight threshold is breached, no more securities from that sector will be removed as part of this screen.
Additionally, to reduce exposure to companies with high fossil fuel reserves, the parent index constituents are simultaneously ranked by their potential carbon emissions per dollar of market capitalization. The highest-ranked securities are excluded until the remaining cumulative potential carbon emissions are half that of the parent index.
The two screens mentioned above are applied independently.
The methodology also excludes companies embroiled in severe ESG-related controversies as well as firms engaged in sectors such as controversial weapons, civilian firearms, gambling, adult entertainment, tobacco, thermal coal, unconventional oil & gas, and arctic oil & gas.
To further align with Catholic values, the index applies three additional exclusions, eliminating companies associated with abortion and contraceptives, animal testing, and stem cell research.
Firms that are still eligible are then assigned ESG scores on a seven-point scale between AAA and CCC based on the most relevant ESG factors by industry and risk exposure. Those with ratings below BB (lower average) are also removed.
The remaining constituents are weighted using a combination of their float-adjusted market capitalization and ESG score while limiting any single stock to a maximum weight of 5%. The index is reviewed each quarter.
According to MSCI, the resulting index exhibits an overall ESG rating of AA, highlighting the strength of the strategy’s sustainability profile. Over 65% of stocks within the index are currently achieving above-average ESG ratings of AAA, AA, or A.
The ETF comes with an expense ratio of 0.27%, amongst the lowest for its category, and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
Caroline Baron, Head of ETF Distribution, EMEA, Franklin Templeton, commented: “Following the launch of the Franklin Catholic Principles Emerging Markets Sovereign Debt UCITS ETF two years ago and further to client interests, we are delighted to expand our offering of values-based products and introduce this new MSCI World Catholic Principles UCITS ETF to European investors. With this new fund, we wanted to offer investors an ESG-focused global equity strategy within an ETF structure that incorporates specific Catholic values but also provides a core equity Article 8 compliant solution.”