Following the recent switches of our ESG Euro Corporate Bond Ex Financials (DR) ETF and our ESG Euro Corporate Bond (DR) ETF to physical replication, our ESG USD Corporate Bond (DR) ETF is now also physical. Originally launched in 2015, our fund holds investment grade bonds with MSCI ESG Ratings of BBB or higher, and excludes issuers with significant coal-based revenues. And with a management fee of just 0.14%, lowering your carbon footprint won’t cost the earth.
Why we’re enhancing our ESG range
There’s no doubt about the key flow trend of 2020, it’s ESG. ESG ETF flows represent more than half of total cumulative ETF flows in 2020, and sustainable fixed income ETFs have been playing a much larger part in that than ever before. As at the end of November this year, sustainable fixed income ETFs had gathered €6.7bn in new assets, nearly double the amount gathered over the same period in 2019.* Demand for greener assets is rising and policymakers around the world are increasingly committing to alignment with the Paris Agreement goals. The E in ESG is more important than ever.
Those goals are close to our hearts too. Earlier this year, Lyxor ETF head Arnaud Llinas, made two promises to our investors – that efforts to enhance our ESG capabilities would never cease and that we would never launch a fund without examining whether we can apply ESG considerations to it first. We’ve kept true to those words ever since. In May, we launched a range of Thematic ETFs, with ESG screens, which we built in partnership with MSCI. More recently, we revealed Europe’s first ecosystem of ETFs dedicated to limiting global warming to 1.5°C between now and 2100. We also switched our entire EUR and USD-denominated corporate bond range to sustainable indices run by Bloomberg Barclays. The next step on our journey is to provide more and more physically replicated credit funds, and apply even more effective ESG screens that can help reduce the carbon footprint of your fixed income portfolio.
To that end, our Lyxor ESG USD Corporate Bond (DR) UCITS ETF became the third of our corporate credit funds to be switched to physical on 14 December. Available for a TER of just 0.14%, our ETF applies business involvement and controversy screens as per the standard Bloomberg Barclays MSCI SRI approach, and excludes issuers with an ESG rating of BBB or lower according to MSCI’s expert ESG analysts. In addition, it excludes issuers which generate 5% or more of their revenues from business activities related to Thermal Coal, Generation of Thermal Coal, Unconventional Oil and Gas, Arctic Gas and Arctic Oil. As a result, we expect to see its current carbon footprint (i.e. carbon intensity) reduced by 5-10%.
According to Philippe Baché, Head of Fixed Income at Lyxor ETF, “The E in ESG is more important than ever. As investors, we all have the power to change the world by helping to shift trillions of dollars towards climate-friendly investments. The changes we’re making to our credit range, allied to our world-leading green bond ETF, should help professionals who manage money on behalf of individuals to build the kind of climate-conscious fixed income portfolios their clients need”.
Learn more about the Lyxor ESG USD Corporate Bond
*Source: Lyxor International Asset Management, as at 30/11/2020
