The latest developments in the ESG space.

Invesco
Invesco has launched a range of global sector ETFs that aim to deliver improvements in their carbon emissions and overall environmental, social and corporate governance profiles. 

The Invesco S&P World Sector ESG UCITS ETFs will track the performance of the S&P Developed Ex-Korea LargeMidCap ESG Enhanced Sector Indices, a new series of flagship benchmarks created by S&P Dow Jones Indices for sustainable sector investing, the firm said in a statement this week.

The four Invesco ETFs, which come under Article 8 of the EU’s Sustainable Financial Disclosure Regulation, offer exposure to actively traded sectors. They include Invesco S&P World Energy ESG UCITS ETF; Invesco S&P World Financials ESG UCITS ETF; Invesco S&P World Health Care ESG UCITS ETF; and Invesco S&P World Information Technology ESG UCITS ETF.

Gary Buxton, head of EMEA ETFs and indexed strategies at Invesco, said: “The strength of flows into ESG strategies over the past few years is partly due to investors wanting to incorporate sustainability throughout their portfolios.” 

“Beyond core equity and fixed income holdings, we are now seeing many of these investors turn their attention towards more targeted exposures, such as sectors, and quite rightly demanding a similarly robust and thoughtful process for integrating ESG,” he continued.

S&P DJI recently published the report, Applying Sustainability to Sector Indices, in which the relevance of sector investing was examined. The report found that a significant portion of a stock’s performance could be attributed to its sector and less to the overall market’s movements. Sector returns also vary widely from year to year, as macroeconomic factors affect specific sectors in different ways.

Jas Duhra, global head of Sustainability Indices at S&P DJI, added: “As a pioneer in the development of sustainability-focused indices, S&P DJI continues to launch innovative indices for investors looking to integrate environmental, social and governance factors into their investing strategies. These broad Indices using advanced optimisation techniques offer diversification and seek to account for financial materiality in each sector.”

Each index seeks to enhance its ESG profile and reduce its carbon footprint, while minimising country and stock deviations relative to the standard sector index. Securities are excluded based on involvement in tobacco, controversial weapons, oil sands, small arms, military contracting or thermal coal being classified as non-compliant according to the UN Global Compact principles.

They are also excluded based on having an S&P DJI ESG Score that falls within the lowest 20 per cent of stocks in the standard index or for not having an ESG Score as well as having carbon intensity levels that rank in the worst 10 per cent of companies in both their GICS Industry Group and the broader S&P Developed Ex-Korea LargeMidCap Index or facing potential ESG risk incidents and/or controversial activities, as deemed by S&P DJI.

Chris Mellor, head of EMEA Equity ETF Product Management at Invesco, said: “We believe that, in tracking these ESG Enhanced Sector Indices, our new ETFs have the potential to deliver meaningful and measurable improvements above and beyond what would be achieved through exclusions alone.” 

The four new ETFs are part of Invesco’s larger range of sector products, which includes 30 US and European sector ETFs with more than $2.3 billion in assets under management. The new launches also form part of the firm’s range of ESG ETFs, which currently has more than $5.2 billion in assets under management in equity and fixed income exposures.