Invesco has today (26 February) announced the launch of the Invesco GBP Corporate Bond ESG UCITS ETF, which aims to provide low-cost passive ESG exposure for income investors.
Tracking the Bloomberg Barclays MSCI Sterling Liquid Corporate ESG Weighted Bond index, the fund will be available with an ongoing charge of 0.1%.
The ESG considerations are applied through exclusions of "severe controversies", including tobacco, thermal coal, oil sands, civilian firearms and military weapons, along with weightings tilted toward better rated firms. This reduces the investable universe from a broad index of "800-plus constituents" down to "just over 400 constituents".
Those with a higher MSCI ESG rating of AAA or AA will have a factor tilt of two, the middling firms will receive a flat score of one, while the "laggards" will have a factor tilt of 0.5.
Companies issuing bonds must also operate in developed markets and have £350m minimum par amount outstanding to be included.
Paul Syms, head of ETF fixed income product management at Invesco, said: "Income investors continue to struggle for decent yield and, up until now, finding an attractive yield with ESG considerations factored into the product has been tough.
"The index this ETF follows has been designed to offer a higher ESG score than the broad corporate bond market but with similar sector exposures, credit ratings and risk characteristics.
"We are offering the same fee [as non-ESG equivalents] while giving investors something that will feel very familiar with regards to the characteristics of the ETF, whether that is duration, yield or the performance of a broader index."
Gary Buxton, head of EMEA ETFs at Invesco, said: "As we continue building out our range of equity and fixed income ESG products, we are keen to ensure investors have not only a well-considered strategy but also an economical way to express their ethical views."