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Invesco launches multi-factor ETF with strict ESG criteria

  • By Andrew Sullivan
  • News

The fund will be actively managed by the Invesco Quantitative Strategies (IQS) team, who will select a portfolio of global equities that offers optimised exposure to Quality, Value and Momentum risk factors while also meeting high ESG standards.


 

Gary Buxton, Head of EMEA ETFs at Invesco, commented, “Three of the biggest trends we have seen over the past decade are growing demand for multi-factor strategies, ESG investments and ETFs more generally. Proven expertise in all these areas has enabled us to respond to investor demand by delivering a multi-factor solution that adheres to strict ESG criteria and has all the benefits you would expect from our ETF structure.”

Since 1983, IQS has been evolving its factor-based, quantitative investment philosophy to incorporate proprietary insights on the behaviour of specific factors and to adapt to the changing needs of investors. Part of this evolution includes almost 20 years’ experience in the implementation of ESG-related strategies.

Manuela von Ditfurth, IQS Senior Portfolio Manager, said, “We believe this strategy could appeal to ESG-focused investors who want to capture the potential benefits of an increased exposure to factors and are not tightly constrained to traditional benchmarks. We use a proprietary risk model to manage the sector, country, currency and stock-specific exposures with a view to retain only those risks for which we believe the investor should be rewarded.”

The investment objective of the IQS ESG Global Equity Multi-Factor UCITS ETF is to deliver superior risk-adjusted returns over the long term when compared to global equity markets. IQS aims to achieve this by investing in an actively managed portfolio of global equities that meet a defined set of ESG criteria.

Eligible stocks are screened for compliance with the fund’s ESG Criteria, and then scored based on their attractiveness with respect to three investment factors: Quality, Value  and Momentum.

The fund will hold a sub-set of these stocks, using an optimisation process that seeks to maximise exposure to those investment factors whilst targeting a risk profile that is consistent with the investment objective. Fund holdings are rebalanced monthly.

The new ETF is the latest in the firm’s responsible investments, with a choice of active and passive strategies. It follows the launch in June of three ETFs providing low cost exposure to customised versions of MSCI ESG Universal indices.

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