Industry Updates

Invesco tightens ESG metrics on FTSE All-Share climate ETF

Companies without an FTSE Russell ESG rating will be excluded

Theo Andrew

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Invesco is set to see the ESG metrics tightened on its FTSE All-Share climate ETF following changes made by the index provider FTSE Russell.

In a shareholder notice, the asset manager said companies that do not have a FTSE Russell ESG rating will be excluded from the Invesco FTSE All Share ESG Climate UCITS ETF (FASE) from 17 March.

The changes will see the removal of companies with a combined weight of less than 1% of the FTSE All Share ex Investment Trust ESG Climate Select index.

FTSE Russell said a quarterly review of the index will remove any companies that are missing ESG scores, with the remaining stocks rescaled as appropriate.

Currently, companies that generate a certain amount of income from controversial weapons, tobacco, adult entertainment, gambling, cannabis, arctic oil and gas exploration and oil sand, thermal coal and nuclear power are excluded.

In addition, companies involved in controversies related to the UN’s Global Compact principles will also be removed from the index.

Index providers across the board have been tightening the ESG metrics on their sustainable indices in part to meet regulatory requirements under the Sustainable Finance Disclosure Regulation (SFDR).

In February, Invesco said it would start excluding companies missing “critical” ESG data from its clean energy ETFs following several changes made to their Solactive indices.

Meanwhile, BlackRock’s $15bn ESG screened ETF range will see its sustainable metrics tightened following changes made by MSCI to the underlying indices.

The same changes led to the closure of the £62.3m Xtrackers MSCI Europe Energy ESG Screen UCITS ETF (XSER) after leaving it with an “extremely small number of constituents”.

Earlier this month, the asset manager said it would start including ESG ETFs within its securities lending programme in a bid to boost the “consistency and price competitiveness of its product range”.

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