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LGIM expands fixed income ESG ETF range with double launch

Offer exposure to US-denominated corporate bonds and emerging market corporate bonds

Tom Eckett

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Legal & General Investment Management (LGIM) has expanded its core fixed income ESG ETF range with the launch of two strategies, ETF Stream can reveal.

The L&G ESG USD Corporate Bond UCITS ETF (USDC) and the L&G ESG Emerging Markets Corporate Bond UCITS ETF (EMUS) are listed on the London Stock Exchange, Borsa Italiana and Deutsche Boerse with total expense ratios (TERs) of 0.09% and 0.35%, respectively.

The firm has partnered with JP Morgan to produce custom indices that provide a higher allocation to green bonds and issuers with the highest ESG scores while also excluding the bottom quintile of issuers based on their ESG scores.

This includes a screen to exclude certain industries such as controversial weapons manufacturers, thermal coal miners, tobacco companies, oil sands from 29 January 2021 and violators of the UN Global Compact.

The ETFs address other inefficiencies found in fixed income index investing such as crowded trades and putting cash to work more efficiently while an increase in the minimum issuance threshold relative to traditional benchmarks also improves liquidity.

The two indices are the J.P. Morgan ESG Global Credit (GCI) Investment Grade USD Custom Maturity index for USDC and the J.P. Morgan ESG CEMBI Broad Diversified Custom Maturity index for EMUS.

LGIM launched its core fixed income ESG range in December 2020. The five-strong range offers exposure to gilts, sterling corporate bonds, 0-5 year sterling corporate bonds, emerging market government bonds and China bonds.

They are:

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