Invesco is launching a range of ETFs that offer passive exposure to broad equity markets, with index weightings determined by the environmental, social and corporate governance (ESG) scores of each company.
The Invesco MSCI ESG Universal Screened UCITS ETFs will aim to offer the performance of customised MSCI ESG Universal indices to investors, with a choice of exposures to the USA, Europe and the World.
The MSCI indices that the ETFs follow are designed to increase exposure to companies demonstrating either a robust ESG profile or a positive trend in improving its ESG capabilities (ESG Momentum).
It will also avoid companies involved in controversial business practices or that do not have an ESG score. Approximately eight percent of securities have been removed from the indices, which are reviewed and rebalanced every six months, based on exclusions.
Gary Buxton, head of EMEA ETFs at Invesco, felt that the launch of ESG-friendly ETFs showed that the asset management company was responsive to client demand.
He said: “We can see that retail and institutional investors are looking to include ESG into their portfolios in some capacity. As this trend continues and demand evolves, our product offering will continue to be shaped by the opportunities we can source in the market to meet the needs of our clients. These new ETFs are examples of being both responsive to current demand and forward-looking in keeping long-term performance at the core of the strategy.”
Chris Mellor, head of EMEA ETF equity product management at Invesco believed that the move was a response to a shift in investor behaviour with ESG strategies becoming increasingly popular.
He said: “As ESG strategies become mainstream, many investors are now wanting to use them as core holdings for their portfolios. That places a greater emphasis on transparency, overall costs and the volatility compared to other funds. These passive ETFs aim to provide similar returns to a broader non-ESG index and with similar costs, while offering the transparency, simplicity and easier access granted by our ETF structure.”
Maria Lombardo, head of responsible investment EMEA at Invesco explained that the ETFs will also utilise proxy voting.
She said: “We have been implementing ESG into client portfolios for more than 30 years now, and actively engaging with companies in which we are invested on various ESG issues. We believe proxy voting is an integral part of our investment process, for active and passive strategies, and that the right to vote proxies should be managed with the same care as all other elements of the investment process. On that basis, we vote for proposals that, in our view, can maximize long-term shareholder value.”
Mr Mellor added: “One of the main reasons we decided to use physical replication for these ETFs is for the voting rights. The ETF will vote in line with the majority holder of the active-equity shares held by Invesco, leveraging the active-equity expertise and comprehensive proxy voting reviews conducted by our teams around the world. In this way, investors know their passive holdings are still making an active difference.”
