Franklin Templeton has unveiled an active ETF to tap into the €165bn (£142.6bn) European green bonds market for David Zahn and Rod MacPhee.
The ETF, available for 30 basis points, launches on the London Stock Exchange on 2 May, several days after its debut on the Deutsche Börse. It aims to outperform the Bloomberg Barclays MSCI Euro Green Bond Index.
Zahn, head of European fixed income, said green bonds are less volatile during periods of risk aversion. “Our data indicates that in both the primary markets and secondary markets, 72% of green bonds had tighter spreads than ordinary bonds after seven days, and 62% were tighter after 28 days respectively,” Zahn said in a press release.
It will invest at least 70% of its net assets in green-labelled bonds, while the remainder of the fund will be able to invest in bonds that are not labelled as green but still finance climate change solutions. Franklin Templeton said the product would provide liquidity to new and existing climate-aligned projects.
The asset manager will require all issuers in the portfolio to comply with a baseline level of environmental impact reporting regardless whether the issue is labelled green.
Franklin Templeton head of ETF sales for Emea Caroline Baron (pictured) said green bonds suit an active approach.
Baron said: “Demand is rising in Europe for high conviction ESG products due to increasing investor and regulatory pressure to incorporate green, ethical and governance factors into investment portfolios. While traditional passive ETFs continue to grow in popularity, we believe that with securities such as green bonds, an actively-managed ETF vehicle that offers full transparency, flexibility and tradability can add value and insight to investors.”
Franklin Templeton already offers nine smart beta and active ETFs within its Irish-domiciled Franklin Liberty shares Ucits ETF range.
