Industry Updates

Lyxor hikes fees on eurozone ETF as it switches to ESG index

TER will rise from 0.07% to 0.12%

Theo Andrew

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Lyxor has switched the index on its European equity ETF to one that incorporates environmental, social and governance (ESG) metrics.

Effective 9 November, the Lyxor Core Euro Stoxx 300 UCITS ETF (MFDD) will see its index change from the Euro STOXX Total Return index to the MSCI EMU Broad Select Net Total Return index.

As a result, MFDD will see its name change to Lyxor MSCI EMU ESG UCITS ETF under the same ticker, with the total expense ratio (TER) rising from 0.07% to 0.12% from December.

MFDD will be classified as Article 8 under the Sustainable Finance Disclosures Regulation (SFDR).

The new index will track the performance of large and mid-cap stocks across developed European Economic and Monetary Union (EMU) countries selected from the parent index, MSCI EMU index, weighted to maximise exposure to higher ESG scores.

Despite the swap in index provider, the top 10 holdings in the ETF will remain largely the same with industrial steam cleaner company Daimer replacing UK chemicals firm Linde.

France and Germany will remain the largest regional weights at 33% and 27.3% respectively, while consumer discretionary (18.4%), financials (15.5%), information technology (15.1%) and industrials (13.1%) remain the big four sector weights.

The ETFs fifth-largest holding, petroleum firm TotalEnergies, will remain so within the new Article 8 classified index, with its exposure upped from 2.05% to 2.25%.

In an interview at COP26 in Glasgow earlier this week, Henry Fernandez, CEO of MSCI, said despite criticism oil and gas companies have a part to play in passive ESG indices as investment products walk the tightrope of high ESG metrics and deviating too much from the benchmark.

“It is because the constructor of that ETF did not want to simply have no exposure to the energy sector, they wanted to have a smaller exposure, and to achieve that they need an oil and gas company in there,” he said.

The switch follows several index changes by Lyxor in the past month including the €142m Lyxor S&P Eurozone ESG Dividend Aristocrats UCITS ETF (EDIV) in October.

In the same month, the French asset manager swapped to an ESG index on the €280m Lyxor MSCI China ESG Leaders Extra UCITS ETF (ASIL) and its $942m Lyxor MSCI USA ESG UCITS ETF (USAL).

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