Invesco launches range of passive ETFs that integrate ESG factors into low-cost, core equity exposure

20 jun 2019

Invesco is launching a range of ETFs that offer passive exposure to broad equity markets, but with index weightings determined by the environmental, social and corporate governance (“ESG”) scores of each company rather than just their size. The Invesco MSCI ESG Universal Screened UCITS ETFs aim to deliver the performance of customised versions of the MSCI ESG Universal indices, with a choice of geographical exposures to the USA, Europe and the World.

Gary Buxton, Head of EMEA ETFs at Invesco, explained, “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.”

The MSCI indices that the ETFs follow are designed to increase overall exposure to those companies demonstrating both a robust ESG profile as well as a positive trend in improving that profile (“ESG Momentum”), while avoiding companies involved in certain controversial business practices or that do not have an ESG score. Currently, only around 8% of securities have been removed from each of the parent indices based on exclusions. The indices are reviewed and rebalanced every six months.

Invesco ESG Universal Screened UCITS ETF range

Chris Mellor, Head of EMEA ETF Equity Product Management at Invesco, 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, commented, “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.”

Mellor continued, “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.”