BNP Paribas AM launches circular economy ETF
BNP Paribas Asset Management (BNPP AM) announced the launch of BNP Paribas Easy ECPI Circular Economy Leaders UCITS ETF under the catchy code of "REUSE". The ETF will be a vehicle for investing in companies that make a positive contribution to the circular economy and for reconciling sustainable investment with healthy financial returns. it will begin trading on 23 May on Euronext Paris, Italy and Germany, Isabelle Bourcier, head of quantitative and index management at BNPP AM, said at a media presentation. Charging a 0.30% fee, the ETF is a sub-fund of BNP Paribas Easy, a Luxembourg Sicav.
“BNPP AM is one of the three largest suppliers of ESG ETFs in Europe; this is a key theme of our strategy and adds value for our clients. As the first asset manager to launch a low-carbon ETF more than 10 years ago, we now aim to expand our BNP Paribas Easy range to ESG indices and to innovate in these still mostly unexplored areas. The launch of this circular economy theme ETF is an integral part of this ambition”, Bourcier said.
BNPP AM’s ESG ETFs managed €2.7bn in assets as of the end of April.
The circular economy is a business model whose objective is to produce goods and services sustainably. The idea is to fully rethink choices and uses of materials while limiting consumption and unproductive use of resources such as raw materials, water and energy, and while producing less waste.
“Greater awareness of the environmental impacts of their business models, and new regulations to preserve natural resources are pushing companies to adopt alternative development strategies while moving towards a more virtuous model”, says Robert-Alexandre Poujade, an ESG analyst at BNPP AM’s Sustainability Centre. “Our analysts study companies’ ability to get the jump on these changes. They engage a dialogue with them to encourage them to adopt more sustainable models.”
The new ETF replicates the ECPI Circular Economy Leaders Equity Index, which was launched in July 2017 by ECPI, an independent Italian ESG research office and index provider. The index is based on a proprietary methodology developed by ECPI, which used five business models developed by Accenture that are characteristic of the circular economy: the supply chain; the sharing economy; products as a service (PAAS), via, for example, financial leases which focus on using an item rather than owning it; longer lifespans; and recycling & resource recovery.
The index consists of 50 equally weighted international large caps from developed economies, out of an investable universe of about 600 companies. The companies are selected for their degree of exposure to circularity, including sectors that are “naturally” circular, such as recycling, renewable energies, cloud services, and sharing platforms, as well as sectors likely to take full advantage of the principles of the circular economy. To ensure the index’s liquidity, components must have at least €500m in market cap and at least €5m in daily trading volume.
As of 30 April 2019, the index’s top 10 components included six companies that work closely with recycling and recovery, which is the easiest business model to implement. They were LVMH, Air Products & Chemicals, ASML Holding, Murata Manufacturing, Kering and Heineken (almost 14% of the index), ahead of four companies working in product lifecycle extension (Cisco Systems, Schneider Electric SE, Ford Motor and Automatic Data Processing (about 9% of the total).