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Lyxor’s Green Bond ETF trebles assets in one year reaching EUR 500 M threshold

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The Lyxor Green Bond (DR) UCITS ETF, the world’s first ETF with an exposure to green bonds, has reached EUR500 million in assets under management, trebling its assets in one year. 

Since its launch in 2017, this Greenfin-labelled ETF has seen its assets rise in synch with the remarkable growth of the underlying green bond market.

Most of Lyxor ETF’s Green Bonds proceeds are used for projects aimed at combating climate change (83 per cent), with the main investments comprising Energy, Green Buildings, Clean Transportation. Recent issues include Société du Grand Paris, Iberdrola, the Dutch State, E.ON, Verizon, Hong-Kong MTR. It reflects Lyxor’s commitment to helping the transition to a low carbon economy.

According to the Climate Bonds Initiative, the green bond market reached a new record in Q3 2020, with issuance peaking at USD73 billion, the highest volume in any third quarter period since market inception in 2007 and the second highest amount on record in any single quarter. Cumulative issuance volume since inception reached USD954 billion and is expected to breach the USD1 Trn milestone in Q4. Reflecting the increasing expansion of this market, the green bonds tracked by the underlying index designed by Solactive have quadrupled to 440, making this a highly diversified fund.

The green bond market is benefitting from the convergence of several market drivers: rising investors’ demand for green assets, an increasing number of companies looking to transform their operational and product model to reduce carbon emissions and achieve carbon neutrality by 2050, as well as a new regulatory framework and a host of stimulus measures designed to stem the Covid-19 induced global recession such as the EU’s Next Generation Recovery Plan – all of which make for an environment conducive to increased green bond issuance.

François Millet, Head of ETF Strategy, ESG and Innovation at Lyxor Asset Management, says: “Investors and policymakers increasingly feel the need to take action against climate change. Asset and wealth managers, private banks and family offices, as well as retail investors now increasingly invest in green bonds through ETFs, which are simple, transparent and data-based. We are proud that our pioneering Green Bond ETF has reached this important milestone and we are convinced of the power of indices and ETFs to reallocate capital at scale towards a carbon-neutral economy. This conviction also led us to launch this year the first ecosystem of climate ETFs tracking the EU’s Climate-Transition and Paris-Aligned benchmarks, designed to meet the Paris Agreement goals”.

Manuel Adamini, Senior Advisor at Climate Bonds Initiative, adds: “We congratulate our long-time Climate Bonds partner Lyxor Asset Management for this important achievement. This is exactly what we need on a global scale, reorienting capital towards climate-relevant projects and assets to achieve Paris Agreement objectives. Passive products pick up a powerful trend in investment management, the ongoing demand for green opportunities, channeling capital away from a fossil-fuel based past into a low carbon and sustainable future, and – most importantly – doing so at minimum cost and friction for investors. The growth that Lyxor is experiencing is a reflection of this momentum gathering in the market. Well done.”

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