The Lyxor Green Bond (DR) UCITS ETF – Acc now has more than EUR300 million in assets under management, making it the world’s biggest green bond ETFs in terms of AUM. Lyxor says this underscores the resilience of the ESG ETF market during the volatility resulting from the COVID-19 crisis.
Launched in February 2017 and tracking the Solactive Green Bond EUR USD IG index, this ETF invests in investment-grade green bonds denominated in euros and US dollars. These bonds are issued by supranationals, local authorities, corporations, banks and development banks to finance projects or assets which benefit the environment in a variety of ways, such as clean energy, energy-efficient buildings, transport and water. Green bonds eligible for the index are approved independently by Climate Bonds Initiative. They must finance activities covered by Climate Bond Taxonomy and meet Climate Bond Standards criteria.
The ETF has earned the Greenfin label, created by the French Ministry of Ecological Transition and Solidarity in late 2015 to certify investment funds’ green credentials. This ETF symbolises Lyxor’s ongoing commitment to fighting climate change, which was most recently reinforced by its launch of the first equity ETF Climate ecosystem designed to meet European Commission standards and reflect the ambitions of the 2015 Paris Agreement. Overall, Lyxor ETF now manages assets of over EUR2 billion in its ESG range.
The Covid-19 crisis and the resulting market volatility could have prompted investors to question their investment approach and, ultimately, their commitment to ESG. They have, however, only become more deeply committed. ESG ETFs raised EUR 1 billion in Europe when the markets bottomed in March and had attracted more than EUR 10 billion by the end of May. These investments do not follow short-term tactical allocation patterns, but instead tend to sit within the more stable parts of portfolios and reflect the structural changes affecting all types of investors.
Green bonds in particular are attracting growing interest from investors looking to accelerate their portfolio’s ecological transition. According to Climate Bonds Initiative, issues of green bonds could reach USD 350 billion by the end of 2020, up sharply from USD257.5 billion in 2019.
François Millet, Head of ESG, Strategy and Innovation for Lyxor ETF, says: “At Lyxor, we made the decision more than ten years ago to put socially responsible investment at the heart of our investment strategy. We are convinced ETFs can help investors to achieve their environmental goals. ETFs are, by their very nature, transparent, simple and fact-based – characteristics that align with ESG priorities. We are proud that a product as innovative as our Green Bond ETF has reached EUR300 million in assets under management within three years.”