Legal & General Investment Management has launched two new corporate bond ETFs which employ a sustainability filter on Xetra and Börse Frankfurt.
The L&G ESG USD Corporate Bond UCITS ETF enables investors to invest in US dollar-denominated corporate bonds from industrial nations worldwide. In addition to an investment grade rating, fixed and floating coupon bonds are included. For inclusion in the JP Morgan Global Credit Index (GCI) ESG Investment Grade USD Custom Maturity Index, bonds must have a minimum outstanding volume of USD500 million and a minimum remaining maturity of six months.
With the L&G ESG Emerging Markets Corporate Bond (USD) UCITS ETF, investors focus on the performance of US dollar-denominated corporate bonds from emerging markets with both fixed and floating interest rates. Only bonds with a minimum outstanding volume of 500 million US dollars and a minimum residual term of six months are considered. However, the JP Morgan ESG CEMBI Broad Diversified Custom Maturity Index limits the remaining maturity to a maximum of five years for inclusion in the index.
In addition, bond issuers are screened for environmental, social and corporate governance sustainability. Bonds from issuers with a higher ESG rating, so-called green bonds, are weighted more heavily and those with a lower ESG rating are underweighted or excluded. Companies with earnings from the coal, tobacco and weapons industries and those that are not in line with the principles of the United Nations Global Compact are not taken into account.