Lyxor Asset Management has expanded its sustainable fixed income ETF suite with the launch of a new fund targeting green bonds from corporate issuers globally.
The Lyxor Corporate Green Bond (DR) UCITS ETF has been listed on London Stock Exchange in US dollars (Ticker: PLAN LN) and on Xetra (PLAN GY), Euronext Paris (PLAN FP), and Borsa Italiana (PLAN IM) in euros.
According to the Climate Bonds Initiative, an investor-focused not-for-profit working to mobilize bond markets for climate change solutions, corporate issuers currently account for the lion’s share of new green bonds, making up approximately 60% of new issuances year-to-date in 2021.
The fund gains its exposure to this important market by tracking the Solactive EUR USD IG Corporate Green Bond TR Index, a new index created by Frankfurt-based index provider Solactive.
The index selects its constituents from a universe of fixed-rate, investment-grade corporate bonds that are denominated in euros or US dollars, have at least €300m or $300m notional outstanding, and have a time to maturity of at least 12 months.
The methodology removes violators of UN Global Compact principles as well as issuers with operations linked to controversial weapons, civilian firearms, adult entertainment, alcohol, gambling, genetic engineering, stem cells, tobacco, or thermal coal.
Solactive then harnesses the data capabilities of Climate Bonds Initiative, an investor-focused not-for-profit working to mobilize bond markets for climate change solutions, to screen the remaining universe for securities that satisfy the requirements to be considered “green”.
According to the organization’s Green Bond Principles, green bonds are “… instruments in which the proceeds will be exclusively applied (either by specifying Use of Proceeds, Direct Project Exposure, or Securitization) towards new and existing Green Projects – defined here as projects and activities that promote climate or other environmental sustainability purposes.”
The group’s Climate Bond Standards take these principles a step further by creating a formal certification framework, which ensures that proceeds are only used for low-carbon, and climate-enhancing projects, and that ongoing transparency and reporting requirements are met.
Constituents are market value-weighted while capping the weight of any single issuer at 5%. The index is reconstituted and rebalanced on a monthly basis.
The split between bonds denominated in euros and US dollars is approximately 75% to 25%. The largest credit bucket allocation is to bonds rated BBB at 56.1%, followed by bonds rated A (33.1%) and AA (9.4%). The index is yielding 0.62% with an effective duration of 6.25 years. Income is accumulated within the portfolio.
The ETF comes with an expense ratio of 0.20%.
Philippe Baché, Head of Fixed Income ETF Product at Lyxor Asset Management, commented: “With the launch of this new corporate green bond ETF, Lyxor provides investors with a well-rounded green bond range – aggregate, government, and corporate exposures – allowing them to pick and choose a green bond ETF best suited to their investment needs, and providing a simple way to take climate action and transition their bond portfolios towards a more sustainable economy.”
Timo Pfeiffer, Chief Markets Officer at Solactive, added: “As we observed a clear upward trend in corporate green bond issuance during the last 24 months – and we expect this segment to grow further – it was about time to create an index for product providers for this niche. Lyxor Asset Management has been one of our main business partners in the realm of green bond investing from the start, and we cannot wait to intensify our projects going forward.”
Lyxor offers the widest range of green bond ETFs in Europe. Its line-up includes the $700m Lyxor Green Bond UCITS ETF (CLIM LN), the world’s first and now largest green bond ETF, the $30m Lyxor Green Bond ESG Screened (DR) UCITS ETF (XCO2 LN), and the $50m Lyxor Euro Government Green Bond (DR) UCITS ETF (EART LN), the first ETF targeting green bonds from eurozone sovereign issuers.