Amundi has switched index on its Italian blue-chip equity ETF, shifting the fund to a benchmark incorporating socially responsible criteria.
The ETF’s new index consists of 40 firms with robust ESG profiles amongst Italian blue-chip companies.
The €40 million Amundi FTSE MIB UCITS ETF has dropped the FTSE MIB Index and is now referenced to the MIB ESG Index, becoming the first ETF to track this benchmark.
The outgoing FTSE MIB, Italy’s foremost equity index, consists of the 40 largest and most liquid stocks listed on the MTA and MIV markets of Borsa Italiana, broadly replicating the sector weights of the entire Italian stock market.
The incoming MIB ESG Index, meanwhile, which was recently created by Euronext in collaboration with Borsa Italiana, is different in that it screens a parent universe consisting of the 60 most liquid Italian companies to identify the 40 firms with the best environmental, social, and governance (ESG) practices.
The index’s ESG methodology is powered by V.E (Vigeo Eiris), part of Moody’s ESG Solutions.
The methodology first excludes violators of UN Global Compact principles as well as companies with operations linked to tobacco, coal, tar sands, oil shale, civilian firearms, and controversial weapons.
V.E then assigns an ESG rating to each remaining firm in the universe. The rating incorporates 38 metrics across six ESG categories: environment, human rights, human resources, community involvement, business behaviour, and corporate governance. A firm’s performance across all 38 metrics is combined to produce an overall score between 0 and 100.
The 40 constituents with the highest ESG ratings are selected and initially weighted by float-adjusted market capitalization subject to an individual cap of 10%.
This index is then evaluated to determine whether there has been an improvement in weighted average carbon intensity (WACI) compared to the parent universe. If this measure has deteriorated, the index will reduce the weight of the security with the worst carbon intensity relative to its revenues, up to a maximum reduction of 30%, continuing with the next-worst carbon offender until WACI is superior to the parent universe.
The index is reconstituted annually with buffer rules helping to limit unnecessary turnover. Rebalancing occurs quarterly.
As of the end of June, the index’s largest sector exposures were financials (32.2%), utilities (17.2%), consumer discretionary (13.3%), industrials (13.1%), and energy (12.6%).
Notable positions included Intesa Sanpaolo (10.2%), Enel (10.0%), Stellantis (9.1%), Eni (9.1%), Unicredit (7.0%), STMicroelectronics (6.7%), and Assicurazioni Generali (5.5%).
To reflect the change in strategy, the fund has been renamed the Amundi Italy MIB ESG UCITS ETF. It is listed on Borsa Italiana (Ticker: FMI IM) and Euronext Paris (FMI FP) in euros.
The 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).
Arnaud Llinas, Head of ETF, Indexing & Smart Beta at Amundi, said: “Responsible investing is at the heart of Amundi’s ETF product development strategy, and this is why we are delighted to partner again with Euronext and accompany investors in the reorientation of capital towards sustainable portfolios. We believe that issuing ESG equivalents of national blue chip indices is also instrumental in helping to democratize ESG investing”.