Invesco has launched two European corporate bond ETFs for sustainable investors as fixed income becomes “more interesting”.
Invesco EUR Corporate Bond ESG Multi-Factor UCITS ETF and Invesco EUR Corporate Bond ESG Short Duration Multi-Factor UCITS ETF are designed to invest across a full spectrum of maturities. Up to 30% of each portfolio may be invested in unsecured corporate bonds denominated in other currencies with the currency risk hedged back to euros. Neither track an index.
Paul Syms, head of EMEA fixed income ETF product management at Invesco, said: “Fixed income has become much more interesting this year. Yields on European credit are at the highest levels we’ve seen in a decade due to a combination of higher interest rate expectations and wider spreads over government bonds.
“Fixed income investors have more to consider now than in recent years, especially if they have sustainability as well as financial objectives.”
Erhard Radatz, senior portfolio manager, Invesco Quantitative Strategies, added: “Introducing ESG principles into a corporate bond portfolio typically means sacrificing yield relative to a standard non-ESG benchmark. That is due partly to the exclusion of traditionally higher yielding segments and because issuers that are reducing their ESG-related risks tend to be higher quality and, therefore, offer lower yields.
“You could address the yield shortfall by overweighting issuers with lower credit ratings, but that may not be in investors’ best interest. Instead, we use a factors-based approach to re-establish characteristics such as duration and credit risks so that the ESG portfolio is more aligned with the standard benchmark.”
These fund launches raise the number of ESG ETFs within Invesco’s range to 28, covering equity and fixed income exposures for almost every geographical region as well as thematic ETFs.