Invesco has expanded its suite of socially responsible core equity ETFs in Europe that deliver meaningful improvements in overall ESG characteristics while also meeting specific climate objectives related to the Paris Agreement.

The fund provides socially responsible Paris-aligned exposure to emerging market equities.

The suite, which debuted in December 2021 with four funds providing exposure to global developed, US, European, and Japanese stock markets, has now added a fifth fund targeting equities from across emerging markets.

The Invesco MSCI Emerging Markets ESG Climate Paris Aligned UCITS ETF has been listed on London Stock Exchange in US dollars (PAEM LN) and pound sterling (PAEX LN) as well as on Xetra (PAUM GY), Borsa Italiana (PAEM IM), and SIX Swiss Exchange (PAEM SW) in euros.

The fund comes with an expense ratio of 0.19%.

The ETF is linked to the MSCI Emerging Markets ESG Climate Paris Aligned Benchmark Select Index which is based on the parent MSCI Emerging Markets Index universe of large and mid-cap stocks across 24 developing countries globally. Chinese A-shares are accounted for at 20% of their float-adjusted market capitalization.

The index construction process begins by removing companies that are embroiled in severe ESG-related controversies or have business operations linked to any of several controversial industries including adult entertainment, gambling, alcohol, nuclear power, recreational cannabis, uranium mining, weapons, tobacco, thermal coal, oil & gas, and oil sands.

Constituents are also assigned an ESG score between AAA and CCC based on the most relevant ESG factors by industry and risk exposure. Firms with ratings below BBB (average) are also excluded.

The remaining securities are then weighted using an optimization process that is designed to meet the requirements of EU Paris-Aligned Benchmarks (PAB) while also pursuing opportunities arising from the transition to a low-carbon economy.

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 as well as a further 10% annual decarbonization going forward, aligning with a trajectory to limit global warming to 1.5°C by 2050.

In addition to the above primary objectives, the index 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 their parent indices.

Each ETF in the suite, which is outlined below, has been classified as an Article 9 product under the European Union’s Sustainable Finance Disclosure Requirement (SFDR).

Invesco MSCI World ESG Climate Paris Aligned UCITS ETF (PAWD LN); 0.19%
Invesco MSCI USA ESG Climate Paris Aligned UCITS ETF (PAUS LN); 0.09%
Invesco MSCI Europe ESG Climate Paris Aligned UCITS ETF (PAES LN); 0.16%
Invesco MSCI Japan ESG Climate Paris Aligned UCITS ETF (PAJP LN); 0.19%
Invesco MSCI Emerging Markets ESG Climate Paris Aligned UCITS ETF (PAEM LN); 0.19%