Alternative Investments/ESG: Invesco Launches ESG ETF For The Canadian TSX Index

The ETF will offer exposure to Canadian large-cap equities.

Invesco’s new ETF launch will trade on the Toronto Stock Exchange and allow investors to invest in Canadian large-cap equities that have been screened for ethical concerns.

The Invesco S&P/TSX Composite ESG Index ETF is the first Canadian-listed ETF to track the S&P/TSX Composite ESG Index. The latter is derived from the benchmark S&P/TSX Composite Index – the headline index for the Canadian equity market – after applying the S&P DJI’s Environmental, Social, and Governance criteria to select companies. (ETF Strategy)

Invesco S&P/TSX Composite ESG Index ETF

After screening, the 223 names in the large-cap headline TSX index reduce to just 95 companies in its ESG version.

The methodology aims to filter out the most controversial companies and provide an ESG tilt. However, it still maintains a risk/return profile similar to the broad Canadian equity market.

It excludes companies involved in tobacco, controversial weapons, thermal coal, and those with a low UNGC score.  It also weeds out companies falling within the worst 25% of ESG scores for each global GICS industry group.

According to Invesco, this process makes the ETF suitable as a core holding in socially responsible investors’ portfolios.

The ETF may also prove attractive to investors because of its low fees of only 0.15%. Hence it claims to be among the most competitively priced Canadian-focused ESG ETFs in Canada.

According to Invesco:

  • There is US$ 12 trillion in U.S. assets under management that are ESG-favourable.
  • 54% of millennials prefer to invest in companies that have a positive social or environmental impact.
  • 96% of advisors think that high-net-worth investors will demand ESG strategies in their portfolios.

Invesco is a veteran in the ESG space

Jason McKay, Head of Wealth Management Intermediaries, Invesco Canada, commented, “Invesco has one of the longest track records in the ESG space, having launched cleantech ETFs in 2005. The newest launch of the Invesco S&P/TSX Composite ESG Index ETF will further expand our global ESG product suite with a Canadian focus, offering investors an ESG overlay on a key benchmark of the Canadian equity market.”

Reid Steadman, Managing Director and Global Head of ESG Indices at S&P Dow Jones Indices, added, “In the last year, ESG has joined the mainstream of investing as market participants increasingly see the importance and relevance of indices that incorporate sustainability data and principles and allow them to achieve their ESG investment goals while attaining performance largely in line with the market. We’re excited to partner with Invesco on the launch of the first ETF product in Canada based on the S&P/TSX Composite ESG Index.”

Related Story:    Insurers Take a Fancy To ESG & Sustainability ETFs (Invesco)

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