Invesco has unveiled a commodity basket ETF that incorporates climate considerations.
The Invesco Bloomberg Commodity Carbon Tilted UCITS ETF (CMOC) is listed on the London Stock Exchange, Euronext Milan, Deutsche Boerse and Six Swiss Exchange with a total expense ratio of 0.35%.
The ETF tracks the Bloomberg Commodity Carbon Tilted index which adjusts the weight of individual commodities – precious metals and grains – based on their greenhouse gas (GHG) emissions associated with their production lifecycle.
CMOC will target a 20% reduction in GHG emissions to the standard Bloomberg Commodity index group weightings.
Higher-emitting commodities will be underweighted while lower-emitting commodities will be overweighted, creating an aggregate GHG reduction.
These will be calculated using a life cycle assessment of the underlying commodities conducted by ESG performance software Sphera.
More than 100 environmental impacts are measured and calculated during different stages of the production process.
The index comprises futures on the same 24 commodities as the Bloomberg Commodity parent index with weighting measured by the environmental costs of the production of the commodities underlying each futures contract.
It does so by grouping commodities with comparable production processes into seven groups; industrial metals, precious metals, agriculture derived, agriculture ex-derived, livestock, primary energy and distillates.
Paul Syms, head of EMEA fixed income and commodity ETF product management at Invesco, said: “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.”
The ETF is classified as Article 8 under the Sustainable Finance Disclosure Regulation (SFDR), the first broad commodity ETF to be classified as such.
Gary Buxton (pictured), head of EMEA ETFs and indexed strategies at Invesco, said the launch of the product was in response to growing demand among investors for ESG products.
“Demand for sustainable investments has been a persistent theme, particularly with respect to climate issues.
“We have seen investors increasingly using ETFs as an efficient way to express their views, with many having integrated ESG strategies into core equity and fixed income components.”
It is Invesco’s fourth ETF launch in little over a month after it unveiled the Invesco Dow Jones US Insurance UCITS ETF (INSU), the Invesco Nasdaq-100 Equal Weight UCITS ETF (IEWQ) and the Invesco FTSE All-World UCITS ETF (FWRA).
Earlier this month, UBS Asset Management launched the Article 6-classified UBS ETF CMCI Commodity Transition SF UCITS ETF (RENEW).