Invesco Launches ETF With Record-Setting $2.4B Investment

Invesco Ltd., the fourth-largest ETF issuer, launched a climate fund with a record-breaking $2.4 billion investment from Finnish pension insurer Varma, the second time this year the firms have teamed up to launch a fund that taps client demand. 

The MSCI North America Climate ETF (KLMN) was little changed at $24.97 in its first day of trading. Varma’s investment exceeds the $2 billion that Ilmarinen, another Finnish insurer, put into the Xtrackers MSCI USA Climate Action Equity ETF (USCA) at its launch in April, 2023. 

KLMN, Invesco’s 13th new fund this year, follows the June launch of the Invesco MSCI Global Climate 500 ETF (KLMT) that Varma helped start with a $1.6 billion initial investment. That fund has gained 7.1% over the past three months. 

Invesco, which manages about $600 billion in 228 exchange-traded funds, is partnering with the Finnish insurer at a time when environmental-themed funds have been widely disparaged in the U.S. by right-leaning politicians and groups. Anti-ESG sentiment doesn’t extend to Europe, said Aniket Ullal, CFRA’s lead ETF researcher. 

“Negative ESG sentiment is mostly a U.S. thing,” he said, noting that ESG flows are on a modest upswing after billions were pulled out in 2023. So far this year, $3.8 billion of inflows have gone into ESG funds, he said, compared with outflows of $9.1 billion last year and inflows of $4.9 billion in 2022.

BlackRock's ESGU 

Most of last year’s outflows resulted from BlackRock Inc., the world’s biggest ETF issuer, pulling its largest ESG fund, the $13.9 billion iShares ESG Aware MSCI USA ETF (ESGU), from its model portfolio after pushback from conservative lawmakers, said Ullal, a member of etf.com's editorial advisory board.

Furthermore, Invesco is partnering with Varma to help the insurer meet demands rather than tapping into U.S. market demand, he said. 

Invesco noted in a press statement that the ETF “will allow Varma to easily execute a large allocation that aligns precisely with their investment views.” MSCI created an index in collaboration with Varma for KLMN, the MSCI Global Climate 500 North America Selection Index, in order to cater to the insurer's investment parameters.