Invesco has launched a Sterling corporate bond Exchange Traded Fund (ETF) in Europe that incorporates environmental, social and governance (ESG) criteria.
Invesco says the ETF aims to address the growing needs of income investors who have had limited choice, especially Sterling-based investors for low-cost passive exposure to an ESG benchmark.
The Invesco GBP Corporate Bond ESG UCITS ETF offers investors the combined expertise of three firms: Bloomberg Barclays for fixed income indexing, MSCI for ESG research and Invesco for the efficiency and liquidity of its ETF structure.
The ETF aims to deliver the performance of the Bloomberg Barclays MSCI Sterling Liquid Corporate ESG Weighted Bond Index, net of fees. The Index comprises sterling-denominated investment grade, fixed-rate securities. Bonds must be issued by companies in developed markets and have £350 million minimum par amount outstanding. Any company involved in tobacco, thermal coal, oil sands, civilian firearms or military weapons is excluded from the Index. The weights of the constituents are then adjusted based upon certain ESG metrics, which seek to increase overall exposure to those issuers demonstrating a robust ESG profile.
The annual management fee is 10% and dividends are paid quarterly. The Index is rebalanced monthly; Invesco says the portfolio manager will be pragmatic when rebalancing the fund. The portfolio manager may also use sampling techniques to match as closely as practical the characteristics of the Index.
The new Invesco ETF is the latest addition to the firm’s fixed income range, which includes low-cost core exposures to government and corporate bond markets, as well as more innovative products that offer investors access to specialist segments. The new ETF also exemplifies the firm’s commitment to providing ESG investors with cost-effective, efficient exposure to key bond and equity markets.
considerations factored into the product has been tough. The Index this ETF follows has been designed to offer a higher ESG score than the broad corporate bond market but with similar sector exposures, credit ratings and risk characteristics. As a result, we would expect the ETF to provide similar yield, duration and overall performance that investors would receive from a broad index.”
Justin Modray, director at Candid Financial Advice said: “It is hard to get excited about a corporate bond index-tracking fund, although they can make sense at the higher quality end of the bond market where active managers may struggle to add value. Since there appears to be a growing appetite for ESG investments this is a timely launch that will no doubt tick the box for some investors. However, ignoring any ESG preference, I continue to prefer strategic bond style funds for mainstream fixed interest exposure given the uncertain outlook for the sector, in a climate where interest rates are more likely to rise than fall medium term. Opting for a manager who has the flexibility to chisel out returns as they see fit across the bond market feels more sensible than a more limited index-tracking fund.”
Further reading: ESG investing for ISAs and five top funds for you to consider