Lyxor goes green for debut ESG ETF listing in The Nordics
Lyxor has listed its first exchange-traded fund (ETF) in Sweden, a Green Bond ETF that started life on 21 February 2017 as the world’s first of its kind. The new listing on the Nasdaq-OMX Exchange of an ETF that has €54.2m of assets under management marks an expansion in the region that has included moving office into a local Societe Generale branch that was opened last year.
“The Nordics is an area where green bonds and responsible finance is very important,” said Adam Laird, head of ETF strategy for Northern Europe at Lyxor in London. “Funds incorporating ESG criteria are very much part of Nordic investment objectives, with probably the best retail market in the world for this sector,” said Mr Laird. “The Swedish pension funds and larger institutions do buy ETFs – it’s a big market for us.”
“There has been more interest from local investors, who can and do buy ETFs that are traded across Europe, but the local listing makes it easier for investors - particularly smaller investors, such as wealth managers and individuals - to buy within their existing framework,” said Mr Laird. “It also gives some assurance to investors that we have a commitment to the local market.”
Lyxor’s debut listing, on 15 January 2019, tracks the Solactive Green Bond EUR USD IG Index, a benchmark of euro- and US dollar-denominated investment-grade green bonds issued by sovereigns, supranationals, development banks and corporates. Green bonds are fixed-income securities whose proceeds are solely dedicated to eligible green projects defined as eligible for inclusion by the Climate Bonds Initiative, an independent, not-for-profit organisation that ranks and reviews green bonds to ensure they maintain their avowed green purpose.
As well as reducing costs, the choice of asset class provides diversification. “Quite often, responsible investments are very equity heavy, which means that they are fairly high risk; bonds provide a way to diversify portfolios, if climate change is important to them,” said Mr Laird.
“With Climate Bonds, it may be a solar power company issuing, but that company may be investing a in a new office or funding a part of the business that does not have a green aspect,” said Mr Laird. “Green bonds could be used to raise money for an oil company, but the proceeds must be ring-fenced specifically for a green environmental project… There is a taxonomy workstream in the European Parliament looking at the potential for formal classification.”