European fixed income ETF provider Tabula Investment Management has launched the world’s first fixed income ETF that is aligned to the Paris Agreement on climate change.

The ETF follows a decarbonization strategy aligned with the objectives of the Paris treaty on climate change.
Listed on Xetra, the Tabula EUR IG Bond Paris-aligned Climate UCITS ETF (TABC GY) delivers a portfolio of euro-denominated investment-grade bonds that have been selected and weighted so as to achieve a 50% reduction in greenhouse gas intensity compared to the broad market.
The fund also incorporates a decarbonization objective that ratchets the intensity of greenhouse gas emissions of the portfolio down by 7% annually, a trajectory that is consistent with the Paris Agreement target of limiting global warming to 1.5°C above pre-industrial levels by 2050.
Greenhouse gas intensity is calculated as the greenhouse gas emissions divided by the book value of the equity and debt of the issuing company.
Investment process
In terms of specifics, the fund tracks the Solactive ISS Paris Aligned Select Euro Corporate IG Index maintained and calculated by Frankfurt-based index provider Solactive. This in turn is derived from the universe of securities that constitutes the Solactive Euro IG Corporate Index, which is representative of the broad euro corporate investment-grade market.
The index is composed of euro-denominated corporate bonds that have at least €500m outstanding and a time to maturity of at least 18 months for new issues entering the index or 12 months for those already in the index. An extensive range of bond types are eligible for inclusion, although they must hold a minimum rating of BBB- by Standard & Poor’s or Baa3 by Moody’s.
In keeping with its ethical intentions, the index applies a series of environment, social and governance (ESG) screens using ISS data with bonds excluded from companies that have violated broadly accepted social norms on issues such as human rights and labour, as guided by the United Nations Global Compact principles, as well as those that sell tobacco, controversial weapons or those that cause significant environmental harm.
Index weights are determined by recalibrating the weights of the parent Solactive Euro IG Corporate Index as necessary to achieve the desired reduction in greenhouse gas emission intensity. This is subject to various constraints that are designed to control risk and ensure that the index maintains a strong correlation with traditional broad euro investment-grade benchmarks.
Specifically, the index rules stipulate that ratings weights may only deviate by 2% versus the parent index; maturity bucket weights may only deviate by 3%; sector weights by 5%, except the financial sector which is permitted to deviate only by 1.5%; issuer weights by 4%; and security weights by 0.5%. Incremental turnover is also capped, at 5% higher than the parent index.
Specialist climate solution
[pullquote]“Tackling climate change is arguably the defining issue of our age and addresses a major risk to all investment portfolios.”
– MJ Lytle, Tabula CEO.[/pullquote]
The net result is an ETF, holding around 200 constituents and with a risk profile comparable to a regular equivalent exposure, that is likely to resonate with investors and advisors seeking a core euro investment-grade corporate bond allocation while satisfying the climate change and other ESG requirements of a growing contingent of increasingly activist end-clients and related regulatory demands.
Commenting on the launch, Michael John Lytle, Tabula CEO, said: “Tackling climate change is arguably the defining issue of our age and addresses a major risk to all investment portfolios. Investors need to utilise specialist climate solutions, and there needs to be a major shift of large asset pools into a range of climate impact investments.”
Tabula CIO, Jason Smith, commented: “The investment management industry has a duty to develop more innovative and higher impact approaches to help divert investment into companies with strong ESG credentials. We believe our latest ETF is the best passive example of this in the fixed income space. We also need to prevent greenwashing and misleading low-carbon claims, improve transparency and comparability, while incorporating broader ESG screening.”
Timo Pfeiffer, Chief Markets Officer at Solactive, added: “Tabula’s innovative approach to passive fixed income has resulted in a liquidity-focused core IG ETF that exceeds the emissions reduction goals of the Paris climate agreement. We are happy that we can serve as the index provider for this meaningful and important ETF that helps to make the world a greener place.”
The fund has an ongoing charge figure (OCF) of 25bps. Income is accumulated. An SEK-Hedged share class is also available, listed on Cboe Europe with ticker COOLx. It has an OCF of 30bps.