Legal & General Investment Management (LGIM) has partnered with London based index provider Foxberry to launch the L&G Europe Equity (Responsible Exclusions) Ucits ETF for investors seeking a dynamic approach to responsible investing while maintaining broad market exposure.
The new ETF and the Foxberry Sustainability Consensus Europe Total Return Index (Sustainability Consensus Index) launched today, has raised €200m from Varma, a leading Finnish pensions insurer that has recently been recognised by the UN-supported, Principles for Responsible Investment (PRI) for work in the sector. With a TER of 0.16%, the ETF is competitively priced and is listed on the London Stock Exchange. The fund uses full physical replication to offer investors direct exposure to its underlying assets.
The index uses the combined expertise of a sustainability advisory committee to help construct the portfolio. The committee's recommendations for exclusion are implemented systematically with a rules-based methodology. With experts from a diverse range of fields, the committee currently includes luminaries with significant Environmental, Social and Governance (ESG) experience including Tomas Franzen and Gustaf Hagerud who were both instrumental in establishing the responsible investing frameworks of Swedish pension funds AP2 and AP3. They provide insight into corporate responsibility and ESG investing and draws on the expertise of major asset owners, such as institutional pension funds. Researching market developments, the committee monitors companies to identify those engaged in irresponsible behaviour across traditional industry classifications.
Guided by the committee, the fund will exclude companies that become less responsible. It will also account for those companies that become more responsible, which may otherwise be missed by static or sector-based exclusion. To encourage and build on consensus in the investment community, the committee will take a collaborative approach that allows investors and interested parties the chance to review summary findings and contribute insights and suggestions to the process.
As a responsible asset owner, LGIM also engages with the boards of the companies in which the ETF does hold shares to promote best practices. This active engagement in corporate governance can help specifically target any companies that may be flagged by the committee's ‘watch list' of companies at risk of exclusion.
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