Paul Syms, head of EMEA ETF fixed income product management at Invesco, is eyeing up environmental, social and governance (ESG) ETFs as part of a wider push in the fixed income space.
Speaking to ETF Stream, Syms (pictured) noted there had been increasing demand from investors for fixed income ETFs with an ESG tilt, however, nothing had come to fruition yet.
Invesco currently offers no fixed income ESG ETFs in Europe but since June, the firm has brought four ESG ETFs to market on the equity side.
“We are looking into fixed income ESG at the moment,” Syms said. “We have to come up with the right product and make sure it hits the right audience.”
One of the issues with launching fixed income ESG products on the ETF side, Syms explained, was because there is no standard definition of what ESG is.
Despite high demand over the years, he said investors have often been not too certain about what it is they want from a fixed income ESG ETF.
“Because there are various definitions of ESG, one of the problems has been making sure we have an ETF that is suitable for as wide an audience as possible.”
However, he noted the firm had not yet decided how far they wanted to go with the ESG criteria.
ETFs can range from having a simple screen that removes certain issuers to having a ratings system which scores companies on their ESG criteria.
Syms, who is speaking at ETF Stream's Big Call: Fixed Income event in September, added: "Overall, fixed income has been behind the curve in adapting to ESG benchmarks but is developing now."
Elsewhere, the EMEA ETF fixed income product management head said Invesco is building out the range along two lines.
The first is expanding the firm’s core range and to make sure there are no broad benchmarks missing from its offering.
Syms, who joined Invesco from Source following the acquisition in 2017, noted how Source had always had a large equity offering but never as much in fixed income so this needs to develop.
For example, he said the firm is planning on launching a euro government bond ETF soon.
The other business line is in the more niche areas of the market. Since the Global Financial Crash, the low yield environment has forced investors either down the credit curve or maturity spectrum.
Therefore, ETF issuers are taking advantage this by offering products that have low correlations to traditional parts of the market.
“ETFs are great if you want to target specific parts of the market,” Syms said. “We are looking at the more innovative areas of the fixed income market to build out our range.”
Invesco is currently the sixth biggest fixed income ETF issuer in Europe, controlling around 5% of the market.