Societe Generale’s asset management and ETF subsidiary Lyxor announced today that it is launching the first EU Paris Agreement-Aligned ETFs, adding to the company’s current portfolio of EU climate benchmark ETFs. The ETFs provide a new tool giving investors exposure to investments that benefit from the coming global energy transition, while avoiding those with unsustainable characteristics.
The Paris Agreement is a multi-nation pact developed by parties to the United Nations Framework Convention on Climate Change (UNFCCC) to combat climate change. The agreement’s main goal is to limit the global temperature increase in this century to below 2 degrees Celsius above pre-industrial levels, and to work toward limiting the increase to 1.5 degrees.
The new ETFs are designed to meet and exceed the EU Paris-Aligned benchmarks’ minimum requirements, with investment objectives that are aligned with the IPCC’s most ambitious scenario based on the 2015 Paris Agreement goals of limiting global warming to 1.5°C “with no or limited overshoot” above pre-industrial levels. They will be adjusted according to the final characteristics set out in the EU delegated acts later this year if appropriate.
Lyxor is rolling out four new ETFs – on Eurozone, European, US and Global equities – tracking S&P Paris-Aligned Climate indices. The new products will adhere transparently to the Task Force for Climate-related Financial Disclosure (TCFD) model for assessing climate-related risks and opportunities and a science-based framework using data and models recommended by the Science Based Targets Initiative.
The ETFs will exclude certain companies, including those active in the fields of coal, and above certain thresholds of oil, natural gas, and carbon intensive electricity production. They also avoid companies harming the EU’s environmental objectives, and those involved in controversial weapons, tobacco or violating societal norms.
The ETFs aim to follow a clear and predictable decarbonisation trajectory by reallocating capital to those companies which are the most ambitious contributors to emission reductions for a 1.5°C global warming scenario, using S&P’s climate data specialist Trucost’s Transition Pathway Model, which relies on forward-looking data to analyse and forecast issuers’ future greenhouse gas emissions. According to Lyxor, This ambitious, “organic” approach to portfolio decarbonisation is made possible by incorporating significant amounts of data from multiple sources and applying a clear data hierarchy. Trucost is a leading company in assessing risks related to climate change, natural resource constraints, and broader environmental, social, and governance factors.
Earlier this year, Lyxor became the world’s first ETF provider to launch an ecosystem of ETFs designed to mitigate climate change, listing a range of ETFs that met the requirements for EU Climate Transition benchmarks, setting explicit targets to curb the rise in temperatures under the new benchmark regulation.
Arnaud Llinas, Head of Lyxor ETF & Indexing, commented:
“EU climate benchmarks are just one of the ways Europe is taking the lead on climate. At Lyxor, we believe in the power of indices and ETFs to build on data and shift capital at scale towards a climate neutral economy. With this latest enhancement to our climate ETF ecosystem, we are helping investors take their decarbonisation ambitions to the next level as well as adopting an even greener approach through fossil fuel exclusions.”
Reid Steadman, Global Head of ESG Indices at S&P Dow Jones Indices, said:
“We are very pleased that Lyxor has selected our S&P Paris-aligned climate indices as the underlying benchmarks for its new exchange-traded funds. We’re proud to offer innovative and transparent indices in Europe and globally that help our clients navigate the transition to a low carbon economy, and capture both financial risks and opportunities.”
The first of the new products to be rolled out is the Lyxor S&P Eurozone Paris-Aligned Climate (EU PAB) (DR) UCITS ETF available today on Euronext and later in July on Xetra. The Lyxor S&P 500 Paris-Aligned Climate (EU PAB) (DR) UCITS ETF will be listed on Xetra and LSE in July. The Lyxor S&P Global Developed Paris-Aligned Climate (EU PAB) (DR) UCITS ETF will be listed on LSE and Xetra in September. The Lyxor S&P Europe Paris-Aligned Climate (EU PAB) (DR) UCITS ETF will be listed on Xetra in September. All of these ETFs are listed with a Total Expense Ratio of 0.20%.