BNY Mellon Investment Management has launched its first actively managed fixed income ETF to directly incorporate environmental, social, and governance (ESG) criteria.
BNY Mellon has introduced its first ESG-tailored fixed income ETF.
The BNY Mellon Responsible Horizons Corporate Bond ETF (RHCB US) is designed to provide socially responsible exposure to the global corporate bond market.
The fund has been listed on NYSE Arca with an expense ratio of 0.35%.
The fully transparent ETF is sub-advised by the North American division of Insight Investment, a BNY Mellon investment firm with $1.2 trillion in assets under management including more than $300 billion within the firm’s fixed income division.
Commenting on the launch, Andy Provencher, Head of North American Distribution at BNY Mellon Investment Management, said: “This is an exciting addition to our growing ETF range as investors and advisors are increasingly looking for outcome-oriented strategies in more versatile investment vehicles.
“By leveraging Insight’s fixed income and responsible investment experience, we’re able to provide our clients with a sustainable investment solution through an actively managed ETF vehicle.”
Investment process
The ETF invests primarily in investment-grade securities issued by corporate issuers worldwide including those domiciled in emerging markets. Up to 20% of the fund’s assets may be invested in high yield or non-rated securities.
The ETF is diversified across the yield curve, having no mandate to maintain an average portfolio maturity or duration.
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Insight’s security selection process seeks out issuers that demonstrate both attractive investment attributes and sustainable business practices.
The firm utilizes both external and internal ESG research, harnessing hundreds of data points that collectively cover 33 key ESG issues including 14 climate-related concerns.
Further boosting the ETF’s sustainability credentials, Insight regularly engages directly with companies regarding their ESG-related risks and, if necessary, actively encourages them to improve their practices.
Svein Floden, Head of Intermediary Distribution at Insight, noted: “Responsible investment is central to our philosophy and culture. We believe that our proposition is compelling and should stand out in a market where few products approach responsible investment via fixed income.”
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In addition to ESG considerations, Insight primarily utilizes bottom-up credit research based on traditional metrics such as leverage and cash flow to select firms perceived to be trading at favourable prices relative to their fundamental value.
BNY Mellon introduced its first ESG ETFs, a trio of actively managed equity funds, in December 2021. The ETFs, which provide exposure to US, developed ex-US, and emerging market stocks, are sub-advised by Newton Investment Management, another BNY Mellon affiliate specializing in socially responsible, theme-based investing.