The latest developments in the ESG space.
Invesco has launched a new UCITS Exchange –Traded Fund (ETF) which provides investors with broad exposure to commodities that incorporate climate considerations.
The Invesco Bloomberg Commodity Carbon Tilted UCITS ETF is designed to track an index that adjusts the weight of individual commodities based on the greenhouse gas emissions associated with their production lifecycle, the firm said in a statement. By balancing these weight adjustments within each commodity group, such as precious metals and grains, the index matches the group-level weightings of the standard Bloomberg Commodity Index, but targets a 20 per cent reduction in the implied GHG emissions per unit of production. The Invesco ETF is the first broad commodity ETF classified as an Article 8 fund under the EU’s Sustainable Finance Disclosures Regulation (SFDR) framework, the firm continued.
“Demand for sustainable investments has been a persistent theme, particularly in respect to climate issues. We have seen investors increasingly using ETFs as an efficient, low-cost way to express their views, with many investors having integrated environmental, social and governance strategies into core equity and fixed income components,” Gary Buxton, head of EMEA ETFs and Indexed Strategies at Invesco, said.
“We are now speaking to investors who want to improve sustainability in the rest of their portfolio. Our new ETF provides broad commodity exposure, with an index methodology that accounts for environmental impacts, and carries the SFDR Article 8 classifications many ESG-conscious investors look for,” he added.
The Bloomberg Commodity Carbon Tilted Index comprises futures on the same 24 commodities as the parent Bloomberg Commodity Index (BCOM), but incorporates into their weighting a measure of the environmental costs associated with the production of the commodities underlying each futures contract, the firm said. The BCOM Carbon Tilted Index groups commodities with comparable production processes into seven groups: industrial metals, precious metals, agriculture derived, agriculture ex-derived, livestock, primary energy, and distillates.
“Commodities can play several roles, such as a portfolio diversifier, a hedge against inflation or a means to gain access to potential growth opportunities. The transition to a low-carbon economy will touch every commodity in the index, including those that are playing an important part in the development of new green technologies. We believe this new ETF offers investors the ability to diversify and align their portfolios more closely with their environmental objectives,” Paul Syms, head of EMEA Fixed Income and Commodity ETF Product Management at Invesco, said.
The ETF will hold a portfolio of US Treasury Bills and will achieve its investment objective by using unfunded swaps, which are agreements with an approved counterparty to exchange one stream of cash flows against another stream, the firm continued. The performance of the Index is swapped to the ETF in exchange for an agreed rate of return reflective of US Treasury Bill market rates.
Invesco’s European ETF business has $17.7 billion in commodity assets, including one of the largest physical gold products and the largest ETF tracking the flagship BCOM index, the firm said. See here for other ESG-focused ETFs from Invesco.