Invesco expands ESG range with launch of first ETF tracking new FTSE All Share ESG Climate index
Invesco has expanded its ESG offering with the launch of two new ETFs intended to suit the needs of investors looking for ESG alternatives for core portfolio holdings.
The first of these launches, the Invesco FTSE All Share ESG Climate UCITS ETF, applies FTSE Russell’s innovative target-exposure approach to deliver a UK equity portfolio with significant improvements in environmental characteristics.
Gary Buxton, Head of EMEA ETFs and Indexed Strategies at Invesco, says: “Flows into ETFs with an ESG objective continue to outpace those without one. As demand continues to broaden out, investors need a greater variety of exposures to tailor asset allocation and meet portfolio objectives. This year, we have started to see an upturn in demand for strategies with a similar profile to standard indices, but with a methodology that rewards companies’ demonstrating better ESG credentials and particularly regarding their impact on the environment.”
Stéphane Degroote, Head of ETFs and Derivatives EMEA at FTSE Russell, says: “Now more than ever, investors recognise the risks and opportunities associated with the low-carbon transition and are incorporating a wider set of considerations, including carbon, green revenues and ESG assessment issues into their decision-making. We are delighted that Invesco has selected FTSE Russell as the index provider for their new ETF.”
The FTSE All Share ex Investment Trusts ESG Climate Select Index excludes companies that have faced severe controversies pertaining to ESG issues or are involved in controversial business areas. The remaining constituents are then re-weighted based on ESG metrics and utilising FTSE Russell’s Target Exposure methodology. The index targets a 50 per cent reduction in index-level carbon emissions, a 50 per cent reduction in fossil fuel reserves, a 50 per cent increase in green revenues and a 10 per cent improvement in index-level ESG ratings. The index is rebalanced quarterly.
Chris Mellor, Head of EMEA ETF Equity and Commodity Product Management at Invesco, says: “While excluding the most controversial businesses, we wanted to make sure that we include companies that are capable of improving their ESG profile , reducing their impact on the climate and helping to solve the world’s environmental problems. Our position as an engaged and active owner of the stocks we hold in our portfolios, both passive and actively managed, allows us to encourage and promote positive change.”
The second of the firm’s launches announced today is the Invesco MSCI Europe ex UK ESG Universal Screened UCITS ETF. It aims to increase exposure to European companies demonstrating a robust and improving ESG profile, while reducing weight in those with below-average or worsening ratings relative to peers. This is the sixth in the firm’s range of ETFs tracking a specific region using MSCI’s “ESG Momentum” approach.
Invesco have launched six new ESG ETF products this year. The firm most recently launched the Invesco Global Clean Energy UCITS ETF, designed to track the world’s first index for new energy solutions. The WilderHill New Energy Global Innovation Index focuses on companies worldwide with innovative technologies driving the generation and use of cleaner energy, energy conservation, efficiency and the advancement of renewable energy.
Buxton says: “Our Global Clean Energy and the even newer FTSE and MSCI ESG ETFs are all good examples of how we are using our simple ETF structure to meet the growing demand of investors. We are keeping investors at the forefront of ETF and ESG innovation.”