Invesco Unveils Active Min Vol Low Carbon ETF In Europe

Invesco Unveils Active Min Vol Low Carbon ETF In Europe

The fund will invest in sustainable companies across developed countries.

Reviewed by: Theo Andrew
Edited by: Theo Andrew

LondonInvesco has launched an actively-managed low volatility and low carbon ETF which invests in sustainable companies across developed countries.

The Invesco Quantitative Strategies Global Equity Low Volatility Low Carbon UCITS ETF (LVLC) is listed on the Deutsche Boerse and the London Stock Exchange with a total expense ratio (TER) of 0.25%.

LVLC selects securities based on its quantitative investment model which applies mathematical, logical and statistical metrics to limit the volatility of the portfolio.

The ETF will use the MSCI World index as a proxy benchmark using an ESG screen on 3,000 global equities, selecting the stocks from each industry with the highest ESG scores.

The portfolio manager will then select stocks from the remaining investable universe with low volatility characteristics while meeting sector, industry and country constraints.

Rebalancing monthly, LVLC will then be optimised based on the value, quality and momentum risk factors.

The firm also unveiled a euro-hedged version of the ETF.

Erhard Radatz, senior portfolio manager at Invesco Quantitative Strategies (IQS), said LVLC seeks to offset the normally high correlation that low volatility defensive stocks have with bigger emitters.

According to Invesco, the utilities and materials sectors account for roughly 60% of the carbon emissions in the US equity markets, despite being just 5% of the market capitalisation.

“Our goal was to substantially reduce carbon intensity while maintaining the benefits of a low volatility portfolio,” Radatz said.  

Gary Buxton, head of EMEA ETFs and indexed strategies at Invesco, added: “We are in the enviable position to be able to harness expertise either from outside specialists or, as in this case, our own in-house capabilities.”

In June, Invesco launched two active multi-factor corporate bond ESG ETFs, the Invesco EUR Corporate Bond ESG Multi-Factor UCITS ETF (ECMA) and the Invesco EUR Corporate Bond ESG Short Duration Multi-Factor UCITS ETF (ECMS).

The issuer said up to 30% of the portfolios may be invested in unsecured corporate bonds denominated in other currencies, which can be hedged back into euros “at the investment manager’s discretion”.

Earlier in the same month, Invesco launched the Invesco MSCI Emerging Market ESG Climate Paris Aligned UCITS ETF (PAEM).


[Editor’s note: This article originally appeared on ETF Stream]

Theo Andrew joined ETF Stream as a senior reporter in September 2021. He has over four years of investment writing experience spanning pensions and retail investments, most recently at Citywire, where he was a senior reporter covering environmental, social and governance investing.