Invesco Introduces GCBE: A Global Corporate Bond ESG ETF

Invesco has announced the launch of a new exchange-traded fund (ETF), the Invesco Global Corporate Bond ESG UCITS ETF, designed to provide investors with exposure to investment-grade corporate issuers exhibiting strong environmental, social, and governance (ESG) profiles.

Gary Buxton, Head of EMEA ETFs and Indexed Strategies at Invesco, emphasized the growing demand for fixed income ETFs in recent years, particularly those aligning with ESG principles. He stated, "Investors have been using ETFs to gain exposure to fixed income markets increasingly over the past five years. One of the main drivers of this acceleration in demand has been the launch of fixed income ETFs targeting specific ESG-related objectives, particularly those aiming to provide an uplift in ESG characteristics while maintaining a similar risk and return profile to a non-ESG benchmark."

The Invesco Global Corporate Bond ESG UCITS ETF will adopt a passive management approach, investing in securities issued by corporate entities across developed markets. The fund's holdings will be adjusted based on predefined ESG metrics.

Tracking the Bloomberg MSCI Global Liquid Corporate ESG Weighted SRI Sustainable Bond Index, the ETF will focus on fixed-rate, taxable debt securities issued by global corporate entities in developed countries. Eligible issuers must hold an investment-grade credit rating, with securities denominated in USD, EUR, GBP, or CAD.

Paul Syms, Head of EMEA Fixed Income and Commodity ETF Product Management at Invesco, highlighted the ETF's investment methodology, which combines exclusions and tilting strategies. He explained, "The ESG-related objective will be achieved through a combination of exclusions and tilting." Issuers involved in certain business activities, holding an MSCI ESG rating below BBB, or encountering significant ESG controversies within the past three years will be excluded from the index.

Syms further elaborated on the index's allocation approach, leveraging MSCI ESG Ratings to tilt allocations relative to market values in the Global Aggregate Corporate Index. Additionally, the index will cap the market value weight of issuers at 5 percent and undergo monthly rebalancing.

Syms concluded by noting the attractiveness of the new ETF for ESG-minded investors seeking to capitalize on current high bond yields and favorable rate environments across multiple currencies. He added, "It may be attractive for ESG-minded investors looking to take advantage of today’s high bond yields and potential for a favorable rate environment going forward, without taking on individual currency risk or deviating too much from the characteristics of the standard benchmark."