Global investment manager Franklin Templeton announced the launch of the Franklin MSCI Emerging Markets Paris Aligned Climate UCITS ETF, a new exchange traded fund for European investors, investing in emerging market securities transitioning to a low carbon economy.

The new fund, classified as Article 8 under the EU’s SFDR regulation, is the fourth in Franklin Templeton’s Paris Aligned Climate ETF, which also includes China, U.S., and Europe-focused funds.

Caroline Baron, Head of ETF Distribution, EMEA at Franklin Templeton, said:

“We are delighted to add this new ETF to our comprehensive suite of Paris Aligned Climate ETFs, which will help investors across Europe transition their assets in line with the Paris Accord. Providing access to distinct opportunities in emerging markets at a competitive fee, this ETF reduces climate risk exposure by investing in companies providing solutions to mitigate climate change as well as those improving their resilience to its consequences, giving them a long-term competitive advantage.”

The new ETF will track the MSCI Emerging Markets Climate Paris Aligned Index, designed to help investors reduce exposure to o transition and physical climate risks, and pursue opportunities arising from the transition to a lower-carbon economy. The index includes large and mid-cap securities across 24 emerging markets countries from its parent index, the MSCI Emerging Markets Index.

According to MSCI, the index incorporates the TCFD recommendations, and is designed to exceed the minimum standards of the EU Paris-Aligned Benchmark. Indices that are labeled as Paris-aligned Benchmarks (PABs) under EU rules must meet criteria for asset selection that results in the index aligning with the long-term climate goals of the Paris Agreement. Criteria include a minimum reduction in greenhouse gas (GHG) emissions intensity of at least 50% compared to the market index, with annual GHG emissions intensity reductions of at least 7%.

Rafaelle Lennox, Head of UCITS ETF Product Strategy at Franklin Templeton, said:

“With this ETF tracking the MSCI Emerging Market Climate Paris Aligned Index, our investors will be able to align their core Emerging Market equity holdings to the Paris Climate Agreement, and thus reduce their exposure to climate change risks as well as capture opportunities related to low carbon transition. Furthermore, by partnering with MSCI’s leading carbon data specialists, this sustainable ETF leverages the latest scientific research to provide a more insightful and robust assessment of climate-related risks and opportunities, both today and in the future.”

The ETF will be managed by Dina Ting, Head of Global Index Portfolio Management, and Lorenzo Crosato, ETF Portfolio Manager, at Franklin Templeton.

Ting said:

“The EU Action Plan has three main objectives to drive the EU transition to a green economy, namely – reorienting capital flows towards sustainable investment, mainstreaming sustainability into risk management and fostering transparency and long-termism. This will require significant investment in infrastructure, energy and technology. An estimated €180 billion5 of additional investment will be needed each year to achieve 1.5ºC scenario. Our Article 8 ETF enables European investors to take part in this significant opportunity and further deepens Franklin Templeton’s wide range of sustainable products.”

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