Lyxor Asset Management has launched the Lyxor Euro Government Green Bond (DR) UCITS ETF, described as the world’s first ETF tracking sovereign Eurozone green bonds.
The firm writes that this launch comes amid strong growth in the sovereign green bond market, prompting investors to consider a pure exposure to this specific segment in their fixed income allocations.
Efforts by governments and the European Union to enhance net zero objectives, step up climate action and point stimulus plans towards a greener economy and more sustainable development goals are expected to fuel further growth in this market, and supporting this is the evolution of EU regulations. The number of sovereign green bond issuers globally more than doubled in 2020 to 18 countries. At the end of 2020, USD 97.7 billion worth of Sovereign Green, Sustainability and Social bonds had been issued from 22 countries. Green remains the dominant label, the firm says.
The Climate Bonds Initiative foresees the overall green bond market (which reached USD 1.27 trillion cumulated issuance globally) expanding by 80 per cent in 2021 compared with the previous year.
Lyxor ETF pioneered the ETF green bond market with the launch of the world’s first green bond ETF back in 2017. Today, this ETF is also the world’s largest with more than EUR 570 million AUM.
Lyxor Euro Government Green Bond (DR) UCITS ETF was listed on Euronext on July 6th with a Total Expense Ratio of 0.20 per cent. Further listings will follow on Xetra, London Stock Exchange and Borsa Italiana in the coming weeks. The ETF tracks the Solactive Euro Government Green Bond Index, representative of the performance of Investment Grade-rated Green Bonds issued by Eurozone countries. To be eligible for inclusion in the index, the bonds must be approved by the Climate Bonds Initiative and meet specific criteria pertaining, in particular, to their issue size (at least EUR300 million outstanding amount), their issuer (governments of the Eurozone primarily), maturity (at least one year until maturity), ratings (only Investment Grade bonds are eligible) and denomination currency (EUR).
“Until today, a strong and diversified sovereign segment was the missing link in the green bond market. We’ve now reached a point where any investor can and should have a green bond strategy as part of a fixed income portfolio. This launch will help investors pursue their net zero carbon objectives by giving them more clarity on the use of proceeds of their investments, including in their core sovereign bond allocation”, says François Millet, Head of ETF Strategy, ESG and Innovation at Lyxor Asset Management.
“As pioneers of the ETF green bond market, Lyxor is constantly striving to fuel innovation on this market, as this launch shows,” says Philippe Baché, Head of Fixed Income ETF Product at Lyxor Asset Management.