Lyxor launches ecosystem of ETFs designed to counter climate change

Lyxor ETF has made a full range of ETFs designed to counter climate change available to investors. 

These ETFs, which Lyxor ETF says are the first of their kind in Europe, are designed to be consistent with the carbon emission reduction targets of the Paris Agreement of 2015. Investors will be able to access European, US, Emerging Markets and World equity exposures in a simple, transparent and cost-effective way. Two of the ETFs (Emerging Markets and US) were listed today on Euronext (in EUR), and they’ll also be listed on London Stock Exchange (in USD) on 7 April. Two further ETFs will follow shortly.

These unique ETFs track MSCI's Climate Change indices, which take into consideration the main objectives of the European Union's regulations on investment benchmarks as part of the EU “Action Plan on Financing Sustainable Growth” of 2018. An essential part of this plan was the creation of new climate transition benchmarks designed to help investors redirect their capital towards portfolios on a decarbonisation trajectory consistent with the objectives of the Paris Agreement.

To build these climate benchmarks, the EU’s Technical Expert Group (TEG) recommended using the Intergovernmental Panel on Climate Change’s (IPCC) most ambitious 1.5°C scenario (1.5°C with no or limited overshoot). In doing so, it proposed a prescriptive framework of minimum requirements for these indices which imply a reduction of global greenhouse gas emissions of 7 per cent year-on-year to achieve net carbon neutrality by 2050.

Most major investment benchmarks currently imply temperature rises of around 4°-6°C between now and 2100, which could mean the end of humankind as we know it. Shifting the trillions away from these non-compliant indices is fundamental to the challenge before us. As of April 2020, index creators will have to disclose whether or not their most significant benchmarks are aligned with the warming objectives of the Paris Agreement and later be able to suggest an alternative plan.

MSCI’s Climate Change indices were designed to fulfil the main objectives of the EU Climate Transition Benchmarks, including an immediate 30 per cent reduction in carbon intensity and a 7 per cent annual absolute emission reduction trajectory, while reallocating capital to the sectors and companies which decarbonise more successfully. Their methodology is expected to change to that of the MSCI Provisional Climate Change EU Climate Transition indices by 30 April at which point they will meet all minimum requirements as provided in the TEG’s Final Report of 30 September 2019.

These unique ETFs augment Lyxor’s existing range of funds giving investors the power to change the world and confirm its position as an ESG and climate pioneer. They mark yet another milestone in Lyxor’s longstanding mission to hasten the transition to a greener economy. Lyxor is already the only ETF provider in Europe to offer investments directly contributing to four of the UN’s Sustainable Development Goals.

This launch is the first in a series of releases of climate-related ETFs from Lyxor over the course of this year. For investors, the end result will be access to Europe’s first fully-fledged ETF climate transition ecosystem. 

Arnaud Llinas, Head of Lyxor ETF & Indexing, says: “By revising its investment benchmark regulations, the EU has assigned passive, rules-based investment managers a key role in the fight against climate change. ETF providers have the opportunity, and indeed the responsibility, to help shift the trillions by offering simple, transparent products which meet the requirements of the new regulation. Through the addition of this unique range we are providing investors with yet more tools to achieve their climate goals."