Invesco has begun rolling out a suite of global sector ETFs in Europe that deliver a meaningful improvement in their carbon emission and overall environmental, social, and governance (ESG) profiles.
Invesco has begun offering ESG-enhanced global sector ETFs in Europe.
The Invesco S&P World Sector ESG UCITS ETFs have debuted with four funds focused on stocks of companies from the energy, financials, health care, and information technology sectors.
Listed on London Stock Exchange in US dollars and pound sterling, the funds are the Invesco S&P World Energy ESG UCITS ETF (USD: WDEE LN; GBP: WEEG LN), Invesco S&P World Financials ESG UCITS ETF (USD: WDFE LN; GBP: WFEG LN), Invesco S&P World Health Care ESG UCITS ETF (USD: WHCE LN; GBP: WHCG LN), and Invesco S&P World Information Technology ESG UCITS ETF (USD: WDTE LN; GBP: WTEG LN).
The ETFs are also available on SIX Swiss Exchange in US dollars as well as Xetra and Euronext Milan in euros.
The four new ETFs are part of Invesco’s larger range of sector products which includes 30 US and European sector ETFs with more than $2.3 billion in assets under management.
Methodology
The funds are linked to S&P Developed Ex-Korea LargeMidCap ESG Enhanced Sector Indices which are constructed from initial universes of large and mid-cap stocks from developed markets globally. Constituents are classified into their respective sectors according to the Global Industry Classification Standard (GICS).
The methodology first removes violators of UN Global Compact principles, companies embroiled in severe ESG-related controversies, and firms with business activities linked to tobacco, controversial weapons, oil sands, small arms, military contracting, and thermal coal.
Companies with overall ESG scores that fall within the lowest 20% of stocks for that sector, as well as firms with carbon intensity levels that rank in the worst 10% of either the initial global developed index or the sector-specific index, are also excluded from selection.
The remaining securities are then weighted using an optimization process that seeks to deliver at least a 30% reduction in carbon intensity relative to the standard sector index, as well as a significant uplift in ESG score, all while minimizing country and stock deviations relative to the standard sector index.
Each ETF comes with an expense ratio of 0.18% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
Income is accumulated within the portfolios.
Commenting on the new listings, Gary Buxton, Head of EMEA ETFs and Indexed Strategies at Invesco, said: “The strength of flows into ESG strategies over the past few years is partly due to investors wanting to incorporate sustainability throughout their portfolios. Beyond core equity and fixed income holdings, we are now seeing many of these investors turn their attention towards more targeted exposures, such as sectors, and quite rightly demanding a similarly robust and thoughtful process for integrating ESG.”
Chris Mellor, Head of EMEA Equity ETF Product Management at Invesco, added: “We believe that our new ETFs have the potential to deliver meaningful and measurable improvements above and beyond what would be achieved through exclusions alone. The ETFs are also expected to achieve their sustainability objectives while avoiding the risk of having an outsized weight in a small number of stocks. That’s important because, in addition to ESG enhancements, we wanted to ensure our ETFs would be suitable for investors wanting the overall profiles to be similar to standard indices.”