Invesco has expanded its fixed income range with the launch of a high yield bond ESG ETF, ETF Stream can reveal.
The Invesco USD High Yield Corporate Bond ESG UCITS ETF (UHYD) is listed on the London Stock Exchange with a total expense ratio (TER) of 0.25%.
UHYD tracks the Bloomberg Barclays MSCI USD High Yield Liquid Corporate ESG Weighted SRI Bond index which offers exposure to developed market issuers that have a strong ESG profile.
Securities are excluded from the index if they have an MSCI ESG rating below BB or have faced ESG controversies over the past three years.
The index also excludes issuers from certain industries including alcohol, adult entertainment, controversial weapons, conventional weapons, genetically modified organisms, firearms, nuclear weapons, nuclear power, oil sands, thermal coal and tobacco.
The ESG rating is applied to re-weight the securities with each issuer capped at 5% to reduce concentration risk.
Paul Syms, head of EMEA ETF fixed income product management at Invesco, commented: “If we start out looking at the broad asset class, we see the current environment could favour taking credit risk over duration for income investors wanting a pick-up in yield, particularly if inflation continues raising the prospects of Federal Reserve rate hikes.
Gary Buxton (pictured), head of EMEA ETFs and indexed strategies at Invesco, added: “We believe investors, the environment and society as a whole should all benefit from the growth of opportunities to invest more responsibly.
“ETFs offer investors even greater choice to express their principles while meeting financial objectives, not only in their equity allocation but increasingly other asset classes, especially fixed income. We expect this trend to continue over the coming months and years.”
The largest high yield bond ESG ETF on the European market is currently the iShares $ High Yield Corp Bond UCITS ETF (DHYA) which has gathered $1.6bn assets under management (AUM) since launching in November 2019.