Lyxor has expanded its range of socially responsible ETFs with a fund that provides exposure to European equities with strong environmental, social, and governance (ESG) characteristics.
The fund provides exposure to companies that have a robust ESG profile, as determined by MSCI ESG Research.
The Lyxor MSCI Europe ESG Leaders UCITS ETF (ESGE FP), which has been listed on Euronext Paris, is linked to the MSCI Europe ESG Leaders Index.
The starting universe for the fund is the MSCI Europe Index which consists of large- and mid-cap stocks across 15 developed market countries in Europe.
The index first excludes all firms involved in alcohol, gambling, tobacco, nuclear power, and weapons manufacturing.
The remaining constituents are then assigned an overall company ESG rating based on research from MSCI’s ESG research division. The rating – one of seven grades from ‘AAA’ to ‘CCC’ – indicates how well each firm manages key ESG issues relative to industry peers.
The methodology then selects constituents with the highest MSCI ESG ratings that make up 50% of the free float-adjusted market capitalization within each GICS sector of the starting universe. By targeting sector weights similar to the parent index, the methodology limits systematic risk introduced by the ESG selection process.
Constituents are weighted by float-adjusted market capitalization, with the index reconstituted annually in May and rebalanced quarterly.
The fund is physically replicated, trades in euros, and comes with a total expense ratio (TER) of 0.20%.
It comes to market with some €500 million in assets under management which appears to have come from a single client redeeming from the Lyxor Stoxx Europe 600 UCITS ETF (MEUD FP).
Lyxor already offers a range of sustainability-focused equity funds, having entered the ESG space in March 2018 with the introduction of its ESG Trend Leaders suite. This range of global, US, eurozone, and emerging market ETFs provides exposure to firms with robust ESG profiles while tilting stock weights towards those that are improving that profile. The funds come with TERs ranging between 0.20% and 0.30%.
Adam Laird, Head of ETF Strategy, Northern Europe at Lyxor, commented, “We are delighted to launch the Lyxor MSCI Europe ESG Leaders UCITS ETF which offers investors an efficient strategy for aligning their European equity exposure with their values and principles.
“Building on the success of our ESG Trend Leaders suite, this new strategy further enhances Lyxor’s pedigree within the socially responsible investing space. Interest in ESG-focused strategies continues to grow at a robust pace, and it is our goal to provide a comprehensive toolkit to meet investor demand.”