Alternative Investments/ESG: iShares Launches Europe’s First Govt Bond Climate ETF

It provides exposure to investment grade eurozone government bonds with a focus on climate considerations.

The iShares € Govt Bond Climate UCITS ETF seeks to track the performance of a climate risk-adjusted index offering exposure to Eurozone, investment-grade government bonds. Among Eurozone government bonds, it will provide a higher exposure to countries less exposed to climate change risks and lower exposure to countries that are more exposed to climate change risks. (Investment Week)

The iShares € Govt Bond Climate UCITS ETF

The passively managed ETF tracks the FTSE Advanced Climate Risk-Adjusted European Monetary Union Government Bond Index.

It charges an expense ratio of 0.09%.

The benchmark index utilizes a tilting methodology that adjusts index weights according to each country’s relative exposure to climate risks across three categories; physical risk, transition risk, and resiliency.

This includes an assessment of the expected economic impact of transitioning to greenhouse gas emissions levels aligned with the Paris Accord target of less than 2°C by 2050, known as transition risk. The physical risk of climate change refers to phenomena such as sea-level rise. Resiliency is the extent of the country’s preparedness to deal with its exposure to climate risks.

Investors’ climate concerns

Arne Staal, global head of research and product management at FTSE Russell, added: “Both institutional and private asset owners are increasingly including climate objectives in their decision making and are adjusting fixed income portfolios based on climate concerns. We expect a growing interest from investors in this area.”

Brett Olson, head of iShares fixed income, EMEA, at BlackRock, commented: “Sovereign issuers are facing increasing pressure to meet sustainability criteria, as more investors consider the ESG profile of their fixed income portfolios.”

“Until today, investors have had very limited options for cost-effective exposure to government bonds that incorporate climate risk.”

Related Story:  Amundi Expands ESG Range With Two New ETFs

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