Industry Updates

Invesco tightens ESG metrics on corporate bond and emerging market ETFs

The ETFs will see additional exclusionary methodology applied

Theo Andrew

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Invesco has tightened the ESG metrics on several ETFs tracking corporate bonds and emerging markets.

In a shareholder notice, the asset manager said it was updating the current investment policy of the ETFs, as well as amending the methodology in a bid to strengthen their sustainable criteria.

The most affected ETFs are the Invesco USD IG Corporate Bond ESG UCITS ETF (PUIG), the Invesco EUR IG Corporate Bond ESG UCITS ETF (PSFE) and the Invesco GBP Corporate Bond ESG UCITS ETF (IGBE), all of which will undergo several changes.

These include additional metrics such as excluding companies that do not have an MSCI ESG rating or controversy score, those that have an ESG rating below BB and those that are involved in business activities including alcohol, gambling, nuclear power, adult entertainment and fossil fuels.

In addition, each index will change its name to include socially responsible investment (SRI) and have an issuer cap of 5%.

Elsewhere, the Invesco USD High Yield Corporate Bond ESG UCITS ETF (UHYD) will see its exclusionary methodology updated to include gambling and fossil fuel companies.

UHYD and IGBE, along with the Invesco Emerging Market ESG Universal Screened UCITS ETF (ESEM), will see their investment policy updated to include ESG as an underlying strategy.

The new investment policy reads: “The fund may also hold some securities which are not component securities of the reference index, but are similar to them and whose risk, return and ESG characteristics that closely resemble the risk, return and ESG characteristics of constituents of the reference index or the reference index as a whole.”

Invesco said the changes will take place on 30 November.

It comes after Invesco made several changes to its ESG ETF range including broadening the scope of the Invesco Global Clean Energy UCITS ETF (GCLX) to include China A-Shares stocks.

Earlier this month, the asset manager said it was downgrading its entire Article 9 Paris-aligned benchmark (PAB) ETF range to Article 8 under the Sustainable Finance Disclosure Regulation (SFDR).

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