Invesco has launched two new ESG ETFs that provide investors with access to investment grade fixed-rate euro-denominated unsecured corporate bonds from global issuers.
The Invesco EUR Corporate Bond ESG Multi-Factor UCITS ETF will invest in bonds across the entire maturity range, while the Invesco EUR Corporate Bond ESG Short Duration Multi-Factor UCITS ETF will focus only on those with no more than five years to maturity.
Paul Syms, head of EMEA fixed income ETF product management at Invesco, said: "Our newest ETFs allow investors to position their portfolio to reflect their own economic views, either investing across the full maturity curve if they believe yields are close to peaking or focusing on short maturity if they are concerned interest rates could rise further than is currently being priced into the market."
Up to 30% of each portfolio may be invested in unsecured corporate bonds denominated in other currencies with the currency risk hedged back to euros at the manager's discretion.
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The ETFs are unconstrained and do not track an index, although performance may be benchmarked against Bloomberg Euro Corporate Bond indices for comparative purposes.
Securities will be selected based on their compliance with the fund's ESG policy, which incorporates both exclusionary criteria and a "best in class" approach, as well as attractiveness determined by the firm's quantitative investment model.
"Introducing environmental, social and governance principles into a corporate bond portfolio typically means sacrificing yield relative to a standard non-ESG benchmark," said Erhard Radatz, senior portfolio manager, Invesco Quantitative Strategies.
"That is due partly to the exclusion of traditionally higher yielding segments and because issuers that are reducing their ESG-related risks tend to be higher quality and, therefore, offer lower yields. You could address the yield shortfall by overweighting issuers with lower credit ratings, but that may not be in investors' best interest."
Instead, the ETFs will use a factors-based approach to re-establish characteristics such as duration and credit risks so that the ESG portfolio is more aligned with the standard benchmark, Radatz said.
The Corporate Bond ESG Multi-Factor UCITS ETF is available for an annual charge of 0.19%, while the fee for the Corporate Bond ESG Short Duration Multi-Factor UCITS ETF is 0.15%.
