Invesco has unveiled a new suite of income-focused ETFs in Canada that seek to combine sustainable dividends with socially responsible exclusion criteria.

Pat Chiefalo, Senior Vice President, Head of ETFs & Index Strategies at Invesco Canada.

The Invesco S&P Dividend Aristocrats ESG Index ETFs have been listed on Toronto Stock Exchange (TSX) with three funds targeting Canadian, US, and global developed ex-North America equity markets.

Each ETF is linked to an index from S&P Dow Jones Indices that deploys the index provider’s ‘Dividend Aristocrats’ strategy of identifying companies that have maintained or increased their dividend payments for a specified number of years.

The investment thesis behind the strategy is that these companies provide a reliable source of sustainable income while also being likely to exhibit favourable fundamental characteristics including consistent operating earnings, steady cash flow growth, and corporate discipline in volatile, low-growth markets.

The three new ETFs also incorporate sustainability screening by including only companies that satisfy certain environmental, social, and governance (ESG) criteria. Specifically, companies that are proven violators of global standards, are embroiled in severe ESG-related controversies, or are involved in controversial weapons, thermal coal, oil sands, civilian firearms, and tobacco are not eligible for inclusion.

Potential constituents are further assigned ESG scores based on SAM’s ‘Corporate Sustainability Assessment’. This score is either calculated directly by a company completing a comprehensive assessment (together with supporting documents), or – in the absence of this – by using publicly available information. Companies with ESG scores that sit in the lowest 25% of their universe are also not eligible for inclusion.

Each index weights its constituents by float-adjusted market capitalization.

The ETFs

The Invesco S&P/TSX Canadian Dividend Aristocrats ESG Index ETF (ICAE CN) tracks the S&P/TSX Canadian ESG Dividend Aristocrats FMC Weighted Index which covers TSX-listed equities of companies that have increased their dividends in at least four of the past five years. Firms that have decreased their dividends in any year will not be eligible for inclusion. The fund comes with a management fee of 0.20%.

The Invesco S&P US Dividend Aristocrats ESG Index ETF tracks the S&P ESG High Yield Dividend Aristocrats FMC Weighted Index which covers US-listed equities of companies that have increased their dividends every year for at least 20 consecutive years. The fund comes with a management fee of 0.30% and is available in unhedged (IUAE CN) and CAD-hedged (IUAE.F CN) share classes.

The Invesco S&P International Developed Dividend Aristocrats ESG Index ETF tracks the S&P International Developed Ex-North America & Korea ESG Dividend Aristocrats FMC Weighted Index which covers companies from developed markets across Europe, the Middle East, Africa, and Asia Pacific that have increased or maintained their dividends for at least ten consecutive years. The fund comes with a management fee of 0.35% and is also available in unhedged (IIAE CN) and CAD-hedged (IIAE.F CN) share classes.

Commenting on the new listings, Pat Chiefalo, Senior Vice President, Head of ETFs & Index Strategies at Invesco Canada, said: “Our expanded dividend ETF line-up aims to provide more choices to investors looking for access to higher risk-adjusted returns with an additional opportunity to buffer against market volatility. The new Invesco S&P Dividend Aristocrats ESG Index ETFs will also be the first products Invesco Canada offers with an ESG-tilt on a dividend income strategy. We will continue to create ETFs that employ the expertise of our industry partners to help clients build more resilient portfolios.”

Bruce Schachne, Chief Commercial Officer at S&P Dow Jones Indices, added: “S&P Dow Jones Indices is very pleased that Invesco Canada has licensed its Dividend Aristocrat indices on the launch of their new funds. As a pioneer of dividend-based indices, S&P DJI continues to create innovative index-based, dividend-oriented solutions for our clients such as Invesco. These indices incorporate dividend-based strategies which reflect the ongoing market sentiment and growing trend of what’s often viewed as a traditional barometer of companies’ financial health combined with sustainability considerations.”