Goldman Sachs Asset Management has become the latest ETF issuer in Europe to introduce a climate-focused fund that is aligned with the carbon reduction goals of the Paris Agreement.
The Goldman Sachs Paris-Aligned Climate World Equity UCITS ETF (WRLD LN) has been listed on London Stock Exchange in US dollars.
The fund is expected to cross-list on Deutsche Börse Xetra on 18 October.
The Paris Agreement is an international treaty on climate change that has the objective of keeping global temperatures below 1.5°C compared to pre-industrial levels by limiting greenhouse gas emissions.
Investment products that are “Paris-aligned” are designed to help investors manage climate transition risks by shifting exposure away from companies or industries that have business models that are inconsistent with a low-carbon future.
GSAM’s newest ETF does this by tracking the Solactive ISS ESG Developed Markets Paris-Aligned Benchmark Index which provides broad developed market equity exposure while satisfying the requirements of the EU’s Paris Aligned Benchmark (PAB) regulation.
The methodology first screens out violators of international principles, companies with very low overall ESG scores, firms deemed to be hampering certain UN Sustainable Development Goals, and issuers with business activities linked to coal mining, fossil fuels, oil sands, tobacco, and weapons.
It then weights the remaining constituents using an optimization process that delivers an immediate 50% reduction in weighted average carbon intensity compared to the initial universe as well as a 7% annual decarbonization going forward.
The optimization is also designed to tilt constituent weights in favour of companies that have adopted science-based emissions targets while limiting deviations in sector and individual constituent weights relative to the starting universe.
The ETF comes with an expense ratio of 0.24% and is classified as an Article 9 product under the EU’s Sustainable Finance Disclosures Regulation (SFDR).
Peter Thompson, Head of GSAM’s European ETF Business, said: “Investors are increasingly focused on obtaining lower carbon intensity exposure to equity markets through simple, low fee, and transparent products. We are excited to introduce the Goldman Sachs Paris-Aligned Climate World Equity UCITS ETF which can contribute towards our clients’ portfolio construction and responsible investing objectives. We look forward to bringing further ETFs with ESG and sustainable characteristics to the market as we continue to expand our ETF offering to European clients.”