State Street Global Advisors has introduced a suite of four climate-focused equity ETFs in Europe that are aligned with the carbon reduction goals of the Paris Agreement.
SSGA has rolled out four core equity ETFs aligned with the carbon-reduction goals of the Paris Agreement.
The suite has launched with four funds providing core exposure to global developed, US, European, and Japanese stock markets.
The ETFs are linked to ‘Climate Paris-Aligned’ indices from MSCI which are based on some of the index provider’s best known regional and single-country benchmarks for global developed (MSCI World), US (MSCI USA), European (MSCI Europe), and Japanese (MSCI Japan) equities performance.
Each parent index comprises large and mid-cap stocks, covering approximately 85% of the total market capitalization of the targeted universe.
The methodology underpinning the Climate Paris-Aligned indices meets the requirements of EU Paris-Aligned Benchmarks (PAB) while also pursuing opportunities arising from the transition to a low-carbon economy.
The process begins by removing companies that are embroiled in severe ESG-related controversies or have business operations linked to weapons, tobacco, thermal coal, oil & gas, and oil sands.
The remaining securities are then weighted based on the risks and opportunities associated with the climate transition. MSCI harnesses a diverse range of data and analytical tools to aid in index construction including scope 1, 2, and 3 carbon emissions, green revenues, and the index provider’s own proprietary low carbon transition score and climate value-at-risk measures.
The indices offer an immediate 50% reduction in weighted average carbon intensity as well as a further 10% annual decarbonization going forward, aligning with a trajectory to limit global warming to 1.5°C by 2050.
In addition to the above primary objectives, the indices aim to achieve secondary objectives such as maximizing exposure to sustainable energy providers, increasing the weight of companies with clear carbon reduction targets, minimizing fossil fuel exposure, reducing climate value-at-risk by 50%, and maintaining a modest tracking error relative to the parent index.
The Funds
The SPDR MSCI World Climate Paris Aligned UCITS ETF has been listed on London Stock Exchange in pound sterling (SWPA LN) and on Deutsche Börse Xetra (SPFW GY) and Euronext Amsterdam (SWPA NA) in euros. The fund comes with an expense ratio of 0.15%.
The SPDR MSCI USA Climate Paris Aligned UCITS ETF has been listed on LSE in US dollars (SPUD LN) and pound sterling (SPUG LN) and on Xetra in euros (SPF9 GY). It comes with an expense ratio of 0.12%.
The SPDR MSCI Europe Climate Paris Aligned UCITS ETF has been listed on LSE in pound sterling (SEPA LN) and on Xetra in euros (SPF5 GY). It comes with an expense ratio of 0.15%.
The SPDR MSCI Japan Climate Paris Aligned UCITS ETF has been listed on Xetra in euros (SPF6 GY). It comes with an expense ratio of 0.12%.