If there’s a universal agreement about the most effective way to promote economic sustainability worldwide, it’s that it will require a global effort in which every country plays a role. This extends to the investment community as well. The success of corporate Environmental, Social, and Corporate Governance (ESG) programs is dependent on investors spreading their money to all parts of the world, rather than just concentrating it in a single market.
One company that recognizes the importance of a global reach is Invesco, an Atlanta-based investment management firm with offices worldwide. In March, Invesco expanded its roster of ESG-focused investment strategies by launching a pair of new exchange-traded funds (ETFs) that target stocks from the United Kingdom and developed Europe excluding the UK.
The funds are the Invesco FTSE All Share ESG Climate UCITS ETF (FASE), and the Invesco MSCI Europe ex UK ESG Universal Screened UCITS ETF (ESEU). Both are listed on the London Stock Exchange (LSE). Invesco said the funds are designed to satisfy the demands of investors looking for socially responsible substitutes for core portfolio positions.
“Flows into ETFs with an ESG objective continue to outpace those without one,” said Gary Buxton, Invesco’s head of EMEA ETFs and Indexed Strategies. “As demand continues to broaden out, investors need a greater variety of exposures to tailor asset allocation and meet portfolio objectives.”
Invesco has seen an increase in demand for strategies that align with standard indices, Buxton added, “but with a methodology that rewards companies’ demonstrating better ESG credentials and particularly regarding their impact on the environment.”
According to an article on the ETF Stream website, the FASE fund is rebalanced quarterly and tracks the FTSE All Share ex Investment Trusts ESG Climate Select index, which excludes companies that have faced severe ESG controversies or are involved in controversial business areas. FASE targets a 50 percent reduction in index-level carbon emissions, a 50 percent reduction in fossil fuel reserves, a 50 percent increase in green revenues, and a 10 percent improvement in index-level ESG ratings.
The ESEU fund tracks the MSCI Europe ex UK ESG Universal Select Business Screens index, which offers exposure to 324 stocks that score well from an ESG perspective.
Invesco has plenty of experience and expertise in both the international and ESG investing arenas. As of March 31, 2021, it managed $1.35 trillion in assets for clients worldwide. The firm boasts more than 8,000 employees around the globe and a direct presence in 25 countries.
Invesco also has built up a strong track record in ESG investing. According to its Statement of ESG Investing Beliefs, the company has received an A+ rating four years in a row from the PRI (Principles for Responsible Investment) for its strategy and governance. Meanwhile, Invesco Real Estate has been recognized for five straight years by GRESB as a global leader in the sustainable management of buildings.
Already this year, Invesco has launched six ESG strategies, including the Invesco Global Clean Energy UCITS ETF (GCLE) earlier in March.
Invesco is part of a larger trend that has seen a rapid increase in ESG funds in terms of both products and the number of assets under management. An analysis from Bloomberg Intelligence earlier this year found that ESG ETFs had net inflows of $89 billion last year, nearly three times the total in 2019 and 10 times the total in 2018. The highest inflows have involved smart-beta ETFs in the U.S. and Europe, meaning they take a rules-based, systematic approach to pick stocks from a particular index.