BNP Paribas Asset Management has introduced its first ETF through its fund platform based in Ireland from where the French asset manager will be better able to compete in key European markets.
Lorraine Sereyjol-Garros, Global Head of Development for ETFs & Index Funds at BNP Paribas Asset Management.
Compared to ETFs launched from Luxembourg, where BNP Paribas’ current ETF suite is located, Irish-domiciled ETFs possess a notable advantage with regard to withholding tax on income received from dividends paid on US stocks – the applicable tax rate is 15% for Irish-domiciled funds and 30% for Luxembourg-domiciled funds.
It is perhaps unsurprising then that BNP Paribas has chosen a sustainable core US equities exposure for its debut ETF launch in Ireland.
The fund is the BNP Paribas Easy S&P 500 ESG UCITS ETF (SPEEU) which has listed on Euronext Dublin, Euronext Paris, and Deutsche Börse Xetra. Further listings on London Stock Exchange, Borsa Italiana, and SIX Swiss Exchange are expected in the near future.
According to BNP Paribas, the firm is planning several more ETF launches from its Irish platform this year with future products also expected to focus on US or global (of which the US, of course, makes up by far the largest country exposure) strategies.
Lorraine Sereyjol-Garros, Global Head of Development for ETFs & Index Funds at BNP Paribas Asset Management, commented: “Regulatory approval for BNP Paribas Easy ICAV will enable us to broaden our ETF offering to investors in countries that favour Irish ETFs, including the UK, Switzerland, the Netherlands, and in the Nordics where BNP Paribas Asset Management is already well established and where we see growing client demand.
“Ireland has a well-developed ETF ecosystem that benefits funds with exposure to US equities, as well as global equities, where we are planning further thematic ETF launches.”
Methodology
The ETF tracks the S&P 500 ESG Index using direct, physical replication. The index screens the bellwether S&P 500 to remove proven violators of UN Global Compact principles, companies embroiled in severe ESG-related controversies, and firms with business activities linked to alcohol, civilian firearms, controversial weapons, gambling, genetically modified organisms, military weapons, nuclear power, oil & gas, palm oil, recreational cannabis, thermal coal, and tobacco.
The index then selects the companies with the highest overall ESG scores while targeting 75% of the float-adjusted market capitalization from each Global Industry Classification Standard (GICS) industry group within the S&P 500.
Reconstitution and rebalancing occur on a quarterly basis with buffer rules helping to limit unnecessary turnover.
The ETF comes with an expense ratio of 0.12% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
There are already several ETFs in Europe that track the S&P 500 ESG Index. The cheapest is the $130m iShares S&P 500 ESG UCITS ETF (ESPX), which comes with an expense ratio of 0.07%, while the largest is the $3.8bn Amundi S&P 500 ESG UCITS ETF (F500 GY), which costs 0.12%.