BNP Paribas has introduced a new ETF – the BNP Paribas Easy ESG Growth Europe UCITS ETF – providing exposure to European growth stocks with attractive environmental, social and governance (ESG) attributes.
BNP Paribas has rolled out a European ESG growth equity ETF on Euronext Paris and Xetra.
The fund has listed on Euronext Paris (EGRO FP) and Xetra (EGRE GR) and comes with a total expense ratio of 0.30%
The fund’s underlying reference index is the BNP Paribas Growth Europe ESG (TR) Index, a proprietary smart beta index designed in-house by BNP Paribas and independently calculated by Solactive.
The index is constructed from a starting universe that is composed of companies incorporated and publicly traded in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
From this initial universe, companies involved in disputable activities (civilian firearms, pornography, tobacco, or gambling), or are in violation of the principles of the United Nations Global Compact, or have been involved in serious controversies related to ESG are excluded.
If after these exclusionary screens the number of companies remaining is more than 80% of the initial universe, the companies with the lowest ESG scores, as calculated by Vigeo Eiris, are also removed so that the number of companies is 20% fewer than the initial universe.
The remaining companies are then ranked based on several growth criteria which include: estimated sales growth, as measured by the forecast growth in revenue in the current fiscal year compared to the previous year; capital expenditure growth, as measured by the median of the yearly capex increase over the previous five years; internal growth rate, which is a function of a company’s return on assets and its earnings retention rate; and employee growth, as measured by the median of the yearly increase in the number of employees over five years.
The 400 companies with the highest overall growth score (essentially an average Z-score based on equal weights applied to each of the four growth measures) form the final selection pool. From this selection pool, companies are then assigned to a decile based on their ESG score.
The final selection and the weight of each constituent is calculated using an optimization algorithm that aims to find the optimal portfolio exposure to the growth factor while enhancing the ESG and carbon profile of the index, subject to various liquidity, turnover, security exposure, and tracking error (relative to the STOXX Europe 600 Index) constraints.
Companies with a model optimal weight of less than 0.01% are discarded, and the weight of the remaining stocks are adjusted proportionately to ensure the aggregate weight of all shares is equal to 100%.
The index currently comprises 76 constituents. Major positions include Roche Holding (3.59%), ASML (3.24%) LVMH Moet Hennessy Louis Vuitton (3.01%), Edenred (2.20%), Lonza Group (2.20%), Merck (2.15%), Aker (2.10%), Givaudan (2.09%), Hermes International (2.06%) and Segro (2.05%).
The composition of the index is reviewed on a monthly basis.
The fund is synthetically replicated and is registered for sale in France, Germany, Italy, Luxembourg, and the Netherlands.
It is compliant with article 8 of the Sustainable Finance Disclosure Regulation (SFDR).