BNP Paribas launches impact bond ETF

BNP Paribas Asset Management has launched a socially responsible fixed income ETF targeting euro-denominated bonds directly linked to positive ESG outcomes.

The ETF offers exposure to bonds directly linked to positive ESG outcomes.

The BNP Paribas Easy JPM ESG Green Social & Sustainability IG EUR Bond ETF has been listed in euros on Euronext Paris (Acc: GSSBD FP; Dist: GSSBO FP) and Deutsche Börse Xetra (Acc: ASRQ GY; Dist: ASRN GY).

The fund is linked to the JP Morgan ESG Green, Social, & Sustainability IG EUR Bond Index which selects its constituents from a universe of investment-grade, euro-denominated bonds issued by government, quasi-sovereign, and corporate issuers globally. Eligible issues must have at least two years remaining to maturity.

The index first harnesses the capabilities of the Climate Bonds Initiative (CBI), an investor-focused not-for-profit working to mobilize bond markets for climate change solutions. The methodology screens for bonds designated within CBI’s ‘green’, ‘social’, or ‘sustainability’ databases.

Green bonds are bonds where the issuer has stated that the proceeds will be used to fund projects with positive environmental impacts such as the construction of renewable energy infrastructure. The proceeds from social bonds are designated to fund projects with positive impacts on society such as reducing unemployment or rehabilitating criminals. Sustainability bonds represent the intersection of green and social bonds.

Bonds from corporate issuers that are proven violators of UN Global Compact principles or are involved in nuclear energy, oil & gas, oil sands, thermal coal, tobacco, or weapons are removed.

The index is initially weighted by market value and then adjusted using a band scalar approach. Issuers are divided into five bands according to normalized ESG scores provided by Sustainalytics and RepRisk. Bonds from issuers in the top band retain their current weight; bonds from issuers in the second band have their weight reduced by 20%; bonds from issuers in the third band by 40%; bonds from issuers in the fourth band by 60%, and bonds from issuers in the fifth band are removed from the index. Bonds that have been officially certified by CBI as ‘Climate Bonds’ (essentially bonds where the proceeds have been proven to be 100% designated to positive environmental impacts) are moved up a band prior to scaling.

The index is reconstituted and rebalanced on a monthly basis.

The ETF comes with an expense ratio of 0.25% and is classified as an Article 9 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).

Denis Panel, Head of Multi-Asset, Quantitative, and Solutions at BNP Paribas Asset Management, said: “Growing client demand for sustainable bonds leads us to offer relevant long-term investment solutions.  This new fund expands our range of sustainable fixed income index funds and demonstrates our desire to be a key provider of thematic ESG ETFs.”

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