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LGIM expands fixed income ESG range with green bond ETF launch

GBND offers investors exposure to green bonds issued across hard currency credit and local currency government bonds

Jamie Gordon

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Legal & General Investment Management (LGIM) has expanded its fixed income ESG range with the launch of a green bond ETF.

The L&G ESG Green Bond UCITS ETF (GBND) is listed on the London Stock Exchange, Borsa Italiana and Deutsche Boerse with a total expense ratio (TER) of 0.25%.

Tracking the J.P. Morgan ESG Green Bond Focus index, GBND offers investors exposure to green bonds issued across hard currency credit and local currency government bonds.

The ETF also has an average credit rating of A+, with weightings in favour of bond issues that have been reviewed by the Climate Bonds Initiative and those which score higher on ‘Certified Climate Bond’ issues and ESG criteria.

Furthermore, LGIM said GBND will exclude low-scoring bond issuers and those operating within controversial sectors, such as weapons and armaments, coal, oil sands, tobacco, and violators of the UN Global Compact.

The launch comes in response to broad demand for sustainable credit products, which is evidenced by the number of corporate green bond issuers growing from 40 at the start of 2017 to 170 as at 17 February.

Commenting on the launch, Howie Li (pictured), head of ETFs at LGIM, said: “As with the rest of the range, we have designed these new ETFs to be portfolio building blocks that answer to investors’ increasing call for ESG integration and liquidity considerations.

“These funds incorporate ESG as standard and employ a liquidity-aware approach, including increased minimum issuance thresholds relative to traditional benchmarks to improve the overall liquidity profile.

“As questions mount on how ‘green’ some bond issues in the market may be, the incorporation of the Climate Bonds Initiative certification process into the design means that we can direct more of an investor’s money towards green projects that have been independently verified.”

Product Panel: LGIM’s fixed income ESG ETF range

The launch of GBND adds to the firm’s expanding fixed income ESG ETF range which debuted in November 2020. Last month, the firm expanded this range with the launch of theL&G ESG Emerging Markets Corporate Bond UCITS ETF (USDC) and the L&G ESG USD Corporate Bond UCITS ETF (USDG).

The green bond ETF space remains relatively small in Europe. Lyxor offers the largest ETF on the market, the €578m Lyxor Green Bond UCITS ETF (CLIM), while Franklin Templeton launched its actively-managed €87m Franklin Liberty Euro Green Bond UCITS ETF (FLRG) in April 2019.

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