Tabula launches Paris-aligned bond ETF to tackle climate change
European fixed income ETF provider Tabula Investment Management (Tabula) has launched a fixed income ETF is aligned to the Paris Agreement on climate change.
Tabula believes that, in 2021, ESG criteria in funds will shift from being one of many investment themes to being a key investment consideration in all investments, and changes in European legislation will institutionalise this. As a result, impact funds will take over the ESG thematic. Paris climate benchmarks will likely become a core allocation for investors with climate concerns. To date, there have not been any passive fixed income funds or ETFs offering this exposure. Tabula is the first ETF provider to tackle this opportunity.
The Tabula EUR IG Bond Paris-aligned Climate UCITS ETF (the “ETF”) delivers exposure to Euro investment grade bonds from companies with 50 per cent lower greenhouse gas emissions when compared to the broad market, and an annual decarbonisation of at least 7 per cent. It undertakes robust ESG screening, with bonds excluded from companies that have violated ‘social norms’ (on human rights and labour, for example), to those selling controversial weapons and tobacco, and from companies that cause significant environmental harm.
The ETF is suitable for core allocations as it applies a strict liquidity filter and sector constraints, while historical back-testing calculates that it would have delivered strong historical correlation with traditional broad Euro investment grade benchmarks. Tabula has worked with Solactive and ISS ESG to develop the ETF’s benchmark, the new Solactive ISS Paris Aligned Select Euro Corporate IG Index, a liquidity-focused Paris Aligned benchmark for Euro IG bonds.
The data used for filtering the bonds is supplied by ISS ESG, part of the Institutional Shareholder Services group of companies (ISS). ISS has existed for almost 30 years and has had a climate practice for over 10 years. Its data is some of the highest quality available in the market.
“Tackling climate change is arguably the defining issue of our age and addresses a major risk to all investment portfolios,” says Tabula CEO, Michael John Lytle. “Investors need to utilise specialist climate solutions, and there needs to be a major shift of large asset pools into a range of climate impact investments.
Tabula CIO, Jason Smith, adds: “The investment management industry has a duty to develop more innovative and higher impact approaches to help divert investment into companies with strong ESG credentials. We believe our latest ETF is the best passive example of this in the fixed income space. We also need to prevent greenwashing and misleading low-carbon claims, improve transparency and comparability, while incorporating broader ESG screening.”
Timo Pfeiffer, Chief Markets Officer at Solactive, says: “Tabula’s innovative approach to passive fixed income has resulted in a liquidity-focused core IG ETF that exceeds the emissions reduction goals of the Paris climate agreement. We are happy that we can serve as the index provider for this meaningful and important ETF that helps to make the world a greener place.”
Tabula is firmly committed to supporting ESG investing. It is a signatory to the UN-supported Principles for Responsible Investing and also to the Climate Action 100+. In addition, Tabula is a member of the Institutional Group on Climate Change and it aims to actively engage with index providers to improve ESG standards across new and existing fixed income indices.
The Tabula EUR IG Bond Paris-aligned Climate UCITS ETF (EUR) – Acc. listed on Xetra on 14 January 2021 with ticker TABC and an ongoing charge figure (OCF) of 25bps. An SEK-Hedged Accumulating share class will list on Cboe on 15 January 2021 with ticker COOLx and an OCF of 30bps.