Ossiam, a smart beta investment specialist and affiliate of Natixis Investment Managers, has listed a new exchange-traded fund, the Ossiam Euro Government Bonds 3-5Y Carbon Reduction UCITS ETF 1C (EUR), on the Xetra exchange in Germany. The fund launches with EUR200 million of investor capital.
The fund’s strategy aims to replicate the performance of the ICE (Intercontinental Exchange) 3-5 Year Euro Government Carbon Reduction Index.
Bruno Poulin, CEO of Ossiam, says: “We are very pleased to announce the launch of our latest ETF to add to our ESG product range. It’s an additional component for investors who wish to manage their portfolio’s total carbon footprint.”
The objective of the new ETF is to provide investors with exposure to eurozone bonds with a 3- to-5 year maturity tranche incorporating a systematic reduction of the portfolio’s carbon footprint by weighting dependent on countries’ respective carbon footprints. To limit relative risks, the composition returns to the benchmark’s performance and risk/return profile when the spreads between Germany and other Eurozone countries diverge at an accelerating rate.
The index is composed of a selection of EUR-denominated sovereign bonds with a remaining maturity greater than three years and less than five years, issued by Eurozone country members. The weights of the bonds in the fund are determined using an optimisation procedure that aims to minimise deviations from the weights of the bonds in the investment universe, the ICE BofAML 3-5 Year Euro Government Index, while reducing the carbon footprint within country deviation limits.
The strategy has an average fossil carbon emission target 30% lower than that of the investment universe. The target is calculated using the carbon data of each country in the portfolio and their respective weights, based on fossil CO2 per capita data published in the European Union’s Emissions Database for Global Atmospheric Research. The strategy allows a 5% maximum deviation of each country’s weight from their weight in the benchmark index. It achieves an actual 12.6% reduction versus the benchmark, in tons of CO2 per capita per year.
The ETF is regulated in Luxembourg, carries a maximum Total Expense Ratio of 0.17 per cent and uses physical replication. It is denominated in Euros.