BNP Paribas adds two new socially responsible bond ETFs

BNP Paribas Asset Management has launched two new ESG-tailored fixed income ETFs providing exposure to short-duration government bonds issued in the eurozone and a broad maturity portfolio of euro-denominated, investment-grade debt.

The BNP Paribas Easy JPM ESG EMU Government Bond IG 1-3Y ETF (Acc: GEU3C; Dist: GEU3D) and BNP Paribas Easy Euro Aggregate Bond SRI Fossil Free ETF (Acc: BSRIC; Dist: BSRID) have been listed on Deutsche Börse Xetra, Euronext Paris, and Borsa Italiana.

Each ETF comes with an expense ratio of 0.15% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).

Commenting on the new listings, Lorraine Sereyjol-Garros, Global Head of Development for ETFs and Index Funds at BNP Paribas Asset Management, said: “Bond ETFs have gained momentum in recent years and their market share by assets under management grew by almost 30% in 2022. Following the launch of our first sustainable bond ETF in 2019, we are further expanding our range of products with these two new funds in order to meet investors’ growing appetite for fixed income exposure using an ESG approach.

“These launches provide investors with additional asset allocation building blocks that have limited levels of tracking error comparable to non-ESG benchmarks.  Our range also includes Paris-aligned benchmark bond ETFs.”

Euro govies

The BNP Paribas Easy JPM ESG EMU Government Bond IG 1-3Y ETF tracks the JP Morgan ESG EMU Government Bond IG 1-3 Year Index.

The index consists of fixed-rate and zero-coupon government bonds issued by Austria, Belgium, Finland, France, Germany, Ireland, Italy, Netherlands, Portugal, and Spain. Eligible issues must be rated investment-grade and have a remaining time to maturity between one and three years.

Index provider JP Morgan harnesses data from Sustainalytics, RepRisk, and the Climate Bonds Initiative to overweight green bond issues or issuers ranked higher on ESG criteria, and to underweight or remove issuers that rank lower.

A country’s ESG rank reflects a mix of qualitative and quantitative analysis including values-based screening, such as participation in controversial weapons and thermal coal; norms-based screening, such as evidence of illegal activities, human rights violations, and disregard for UN Global Compact principles; and positive screening, which rewards countries with robust ESG business practices.

The new fund complements two existing BNP Paribas’ ETFs which utilize the same investment approach but target eurozone government bonds with maturities between three and five years or bonds from across the yield curve.

Euro aggregate

The BNP Paribas Easy Euro Aggregate Bond SRI Fossil Free ETF, meanwhile, is linked to the Bloomberg MSCI Euro Aggregate ex Fossil Fuel SRI Select Index.

The index includes euro-denominated sovereign and corporate investment grade bonds with €500 million par outstanding and remaining maturities greater than one year.

The methodology screens out violators of UN Global Compact principles, issuers embroiled in severe ESG-related controversies, and firms with notable business operations linked to adult entertainment, alcohol, gambling, tobacco, weapons, nuclear power, thermal coal, fossil fuels, and genetically modified organisms.

The remaining issuers are assigned ESG scores based on an analysis conducted by MSCI ESG Research. The methodology removes the issuers with the lowest ESG scores until at least 20% of the number of issuers from the initial universe are excluded.

Constituents are weighted by market value outstanding while setting the weights of the Treasury, government-related, and corporate sectors to match those of the original universe.