Ossiam has become the latest ETF issuer in Europe to introduce a suite of climate-focused equity funds that are aligned with the carbon reduction goals of the Paris Agreement.

The Paris Agreement seeks to limit global warming to 1.5 by 2050.

Upon launch, the suite includes six ETFs targeting US, Canadian, eurozone, Europe ex-eurozone, Japanese, and Asia Pacific ex-Japan stock markets.

Two additional funds, which will cover global developed and pan-European equities, are scheduled to debut in the near future.

The ETFs, which come with expense ratios ranging from 0.12% to 0.29%, have been listed on Xetra, SIX Swiss Exchange, and Euronext Paris in euros.

Most of the funds have come to market with significant assets under management.

Other ETF issuers in Europe with suites of Paris-aligned equity ETFs include State Street Global Advisors, Invesco, Legal and General Investment Management, Franklin Templeton, HSBC Asset Management, DWS, BNP Paribas, Amundi, and BlackRock.

BlackRock and Tabula Investment Management, meanwhile, have also extended the Paris-aligned methodology into the fixed income ETF space.

Methodology

Ossiam’s latest ETFs are linked to indices developed by Bloomberg which are based on initial universes comprising large and mid-cap equities from the target regions.

The methodology first removes companies that are embroiled in severe ESG-related controversies or have business operations linked to weapons, tobacco, thermal coal, and oil & gas.

The remaining constituents are then weighted using an optimization technique that aims to satisfy the requirements of EU Paris-Aligned Benchmarks and align with a trajectory to limit global warming to 1.5°C by 2050. These requirements include an immediate 50% reduction in weighted average carbon intensity compared to the parent universe as well as a further 7% annual decarbonization going forward.

In addition to the above primary objectives, the indices aim to achieve secondary objectives such as increasing the weight of companies with clear science-based carbon reduction targets, maintaining an aggregate exposure to high climate impact sectors at least equal to the parent universe, and maintaining other Do No Significant Harm (DNSH) environmental indicators at least equal to the parent universe.

The six DNSH indicators reflect the impact on climate change mitigation, climate change adaptation, the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control, and the protection and restoration of biodiversity and ecosystems.

Due to the indices’ comprehensive climate-friendly investment approach, each ETF has been classified as an Article 9 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).

The funds, along with their current AUM and total expense ratios, are outlined below.

Ossiam Bloomberg USA PAB UCITS ETF (OP7H); $200m AUM; 0.12% TER.
Ossiam Bloomberg Canada PAB UCITS ETF (OP8H); $70m; 0.29%.
Ossiam Bloomberg Eurozone PAB UCITS ETF (OP2E); $70m; 0.17%.
Ossiam Bloomberg Europe ex Eurozone PAB UCITS ETF (OP4E); $90m; 0.17%.
Ossiam Bloomberg Japan PAB UCITS ETF (OP5E); $10m; 0.19%.
Ossiam Bloomberg Asia Pacific ex Japan PAB UCITS ETF (OP6E); $110m; 0.29%.

Pending launches:

Ossiam Bloomberg World PAB UCITS ETF (OP9U); 0.20%
Ossiam Bloomberg Europe PAB UCITS ETF (OP1E); 0.15%

Paul Lacroix, Head of Structuring at Ossiam: “Moving our strategies to the Bloomberg Paris-Aligned Benchmarks is consistent with our long-term product development strategy to offer a wide range of useful building blocks. We can offer investors the most advanced and authentic approach to track equity markets with a trajectory for continuous carbon footprint reduction.”

Dave Gedeon, Global Head of Multi-Asset Indices at Bloomberg: “The market is shifting its focus to aligning both policy and investment to a net-zero future, so we worked extensively to create a new family of broad benchmarks that can be aligned with the Paris Accords. We’re proud to have been selected by Ossiam to provide equity benchmarks for eight new ETFs, offering investors the opportunity to align their portfolios with the confidence of Bloomberg’s industry-leading climate data powering these benchmarks.”