Lyxor, one of Europe’s largest ETF providers, announced today the launch of the Lyxor Euro Government Green Bond (DR) UCITS ETF, the first ETF tracking sovereign Eurozone green bonds.
The green bond market has grown rapidly in the past few years, with much of the recent growth being driven by the entrance of sovereign issuers. The UK recently unveiled its Green Financing Framework as it prepares to issue at least £15 billion of green gilt this year, and other countries including Italy and Germany also recently issued their first green bonds. The European Union is set to become a central region for sovereign sustainable finance, with 30% of the European Commission’s €750 billion NextGenerationEU multi-year recovery budget earmarked to be financed through green bonds.
According to the Lyxor, nearly $98 billion of sovereign green, sustainability, and Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. More bonds had been issued from 22 countries by the end of 2020, with green as the dominant label.
François Millet, head of ETF Strategy, Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. More and Innovation at Lyxor AM, said:
“Until today, a strong and diversified sovereign segment was the missing link in the green bond market. We have 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.”
The new ETF tracks the Solactive Euro Government Green Bond index, which follows the performance of investment grade-rated green bonds issued by eurozone countries. Green bonds included in the index must be approved by the Climate Bonds Initiative, and meet a series of criteria including size, time to maturity, and rating, with only investment-grade bonds eligible.
Philippe Baché, Head of Fixed Income ETF Product at Lyxor Asset Management, said:
“As pioneers of the ETF green bond market, Lyxor is constantly striving to fuel innovation on this market, as this launch shows.”
The ETF is listed on Euronext, with further listings to follow on Xetra, London Stock Exchange, and Borsa Italiana.
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