Legal & General Investment Management (LGIM) has launched a hard currency green bond ETF targeting corporates and local currency government bonds using an actively-designed index.
The fund implements ESG scoring and screening methodology, focusing on bonds that have been reviewed by the independent Climate Bonds Initiative and allocating cash towards bond issuers that rank higher on ESG criteria and climate issues.
Green bond issuances that have not been reviewed independently will be excluded, whilst the lowest scoring bond issuers and certain industries such as coal mining, tobacco and oil sands will also be avoided.
The ETF adds to a new suite of bond ETFs launched by the firm in the first quarter, adding to the L&G ESG USD Corporate Bond Ucits ETF and L&G ESG Emerging Markets Corporate Bond Ucits ETF, which were both listed in January 2021.
The L&G ESG Green Bond Ucits ETF’s portfolio of global bonds has an average credit rating of A+, the UK fund manager said. It tracks the JP Morgan ESG Green Bond Focus Index.
Howie Li, head of ETFs at LGIM, said the ETFs have been designed to be portfolio building blocks catering to increased demand for ESG integration and liquidity considerations.
“These funds incorporate ESG as standard and employ a liquidity-aware approach, including increased minimum issuance thresholds relative to traditional benchmarks to improve the overall liquidity profile,” he said.
According to the Climate Bonds Initiative, there were $258 billion (€213.8 billion) worth of green bonds issued in 2019 compared to $171 billion in 2018, with most of those bonds issued by European companies.
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