State Street Global Advisors (SSGA) announced the launch of two new fixed income ESG-linked ETFs, the SPDR Bloomberg SASB Euro Corporate ESG UCITS ETF (SPPR GY), available immediately, and the SPDR Bloomberg SASB U.S. Corporate ESG UCITS ETF (SPPU GY), launching October 26.

According to SSGA, the new bond ETFs, aim to provide investors with a total return, taking into account both capital and income returns, while pursuing an effective, positively screened and benchmark aware ESG methodology. SPPR GY and SPPU GY, respectively, will track the performance of investment grade Bloomberg SASB Euro Corporate and U.S. Corporate ESG Ex-Controversies Select Indexes. 

Developed by Bloomberg Indices in collaboration with the Sustainability Accounting Standards Board (SASB), and based on  the Bloomberg Barclays Euro and US Corporate Indices, the ESG Ex-Controversies Select Indices select securities eligible for their respective indices and weight them using an optimization process, while controlling for active total risk. The indices exclude issuers that are tagged with extreme event controversies, controversial weapons, UNGC violations, civilian firearms, thermal coal extraction, and tobacco companies.

Security selection and weighting in each index is aimed at maximizing the portfolio ESG score while maintaining similar risk and return characteristics of the parent index. ESG scores are derived from the State Street Global Advisors R-Factor (Responsibility Factor) scoring system, developed by SSGA to leverage multiple data sources and align them to widely accepted, transparent materiality frameworks to generate unique ESG scores for listed companies. R-Factor utilizes the SASB materiality map, an algorithm designed by SASB to enable businesses to identity, manage and communicate financially material sustainability information to their investors.

Antoine Lesné, head of Research & Strategy for SPDR in EMEA said:

“With the launch of our two new investment grade ESG focused ETFs, we are providing investors with a new and innovative approach to positively screen in a transparent and ‘best in class’ way. By also providing a similar risk/return profile to the two broad parent indices, investors can use our new ETFs to complement their core asset allocation or use them as replacement strategies.”

Matteo Andreetto, head of SPDR for EMEA, said:

“Trends that have been bubbling under the surface for the last decade have now come to a head, making ESG a significant and central building block of a portfolio. In addition to this, large-scale wealth transfers from Boomers to their children, and a greater emphasis on living according to values, has encouraged ESG adoption.

“The investment industry is responding well to these trends, providing investors with more solutions to satisfy a growing appetite for ESG factors in portfolios.”