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The Lyxor ETFs on this website may be restricted for certain individuals or in certain countries pursuant to the national regulations applicable to those individuals or countries. It is therefore your responsibility to ensure that you are authorised to invest in the Lyxor ETFs on this website. 

 

If you are an investor in the United Kingdom, please go to www.lyxoretf.co.uk  

If you are an investor in the Netherlands, please go to www.lyxoretf.nl  

If you are an investor in Italy, please go to www.lyxoretf.it  

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If you are an investor in Germany, please go to www.lyxoretf.de   

If you are an investor in Singapore, please go to www.lyxoretf.com.sg  

If you are an investor in Switzerland, please go to www.lyxoretf.ch  

If you are an investor in Belgium, please go to www.lyxoretf.be  

If you are an investor in Poland, please go to www.lyxoretf.pl 

If you are an investor in Norway, please go to www.lyxoretf.no

If you are an investor in Denmark, please go to www.lyxoretf.dk

If you are an investor in Luxembourg, please go to www.lyxoretf.lu

If you are an investor in Sweden, please go to www.lyxoretf.se

If you are an investor in Finland, please go to www.lyxoretf.fi

 

 

The Lyxor ETFs on this website are undertakings for collective investment in transferable securities (UCITS) (i) domiciled in France and approved by the Autorité des Marchés Financiers (AMF) or, (ii) domiciled in Luxembourg, approved by the Commission de Surveillance du Secteur Financier (CSSF) and authorised to market their units or shares in the French Republic in accordance with the notification procedure under Article 93 of Directive 2009/65/EC. Investors should note that the prospectuses of certain Lyxor ETFs under Luxembourg law that have been notified in accordance with this procedure are only available on the website in English. A French translation of these prospectuses can be obtained upon request by sending a letter to Lyxor International Asset Management (“Lyxor”) – 17 Cours Valmy, 92987 Paris La Défense, France.

 

The information on this website is not intended for persons or entities that are resident, located or registered in jurisdictions that are not authorised to distribute Lyxor ETFs. As a result, the information on this website does not constitute an offer or solicitation to buy or sell units or shares in these ETFs by anyone in any jurisdiction:

 

(a)   in which such an offer or solicitation is unauthorised;

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(c)   in which it is unlawful to make such an offer or solicitation.

 

In particular, the Lyxor ETFs on this website are not and will not be registered under the United States Securities Act of 1933, as amended. As such, they may not be offered or sold within the United States of America, except in specific cases where transactions are exempt from registration under the Securities Act. The ETFs listed on this website may not be sold to US citizens or transferred to the United States by any other means, unless this transaction is not subject to any specific registration under US law. 

 

Any person from a jurisdiction to which the above-mentioned restrictions apply should inform themselves of and observe these restrictions.

 

This website is intended for commercial purposes and is not regulatory in nature. Although the information provided has been drawn up on the basis of sources considered to be reliable, there is no guarantee that it is accurate, complete or relevant. Some of the information on this website is provided on the basis of market data collected at a specific time and may therefore vary over time. Lyxor advises investors to read the risk factors section of the prospectus and the key investor information document carefully. These documents can be found on the website.

 

The net asset value (“NAV”) of Lyxor ETFs may at any time be subject to considerable price fluctuations, which in some cases may lead to the loss of all of the capital invested. Investors should note that some ETFs may be sensitive to fluctuations in the exchange rate between their reference currency and that of the underlying index, as well as of the components of the underlying index.

 

Before investing in a Lyxor ETF, you should carry out your own risk analysis of the product from a legal, tax and accounting perspective, rather than basing your decision solely on the information provided. If necessary, you should consult your own advisers or any other qualified professional. 

 

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By clicking on institutional or individual above, I confirm that I have read and understood the information provided herein, and that I am resident or registered in Belgium.

02 Feb 2021


Three surprising insights from our new ETF temperature tool

Last month we launched our new COtool, which allows you to see how more than 150 Lyxor ETFs align with the temperature goals of the Paris Agreement.

We’ve been delighted with all the positive feedback as we encourage the industry towards total transparency and honesty. We hope you continue using the tool to analyse the implied temperature rise of your investments. And remember: we show you Lyxor ETF temperatures, but they are based on underlying indices which are also being tracked by several other ETF issuers.

In any case, the COtool has been live for a little over a week – and today we are going to share some of the most interesting things we’ve learned so far.

Many European utilities are 1.5°C aligned

Utilities companies provide electricity, natural gas and water, among other amenity services. This sector is excluded from many ESG indices due its high carbon impact. Yet, in the COtool, the European utilities sector (as represented by the STOXX Europe 600 Utilities Index) is 1.5° aligned, with 65% of its AuM under the 1.5° threshold. 

1.5°C

Even the MSCI World Utilities index, comprised of over 50% US companies, has an implied temperature of 1.8°C – under the Paris Agreement’s 2° central scenario. Why?

Utilities are aligned because the sector is “under budget”. Our methodology assigns a carbon budget to utilities using the sectoral decarbonisation approach (SDA). SDA factors in the decarbonisation opportunities of a given sector – and while high carbon budgets are allocated to utility companies because they tend to be carbon-intensive, those budgets are decreasing year on year.  

In fact, most utility companies are aligned because the sector is more advanced than other industries in terms of its transition to a low-carbon economy. Even though much more needs to be done to decarbonise the sector, a significant number of emission-reducing projects have been launched over the last decade. Many utilities have also made firm commitments to a well below 2° scenario with the Science Based Targets initiative. 

Most indices are above 3°

Depending on your knowledge of the financial industry, this might not be a big surprise. But it’s worth highlighting that most indices are aligned with a ‘business as usual’ temperature outcome, above 3°. 

1.5°C

1.5°C

One option to reduce the temperature impact of a core portfolio building block, such as the S&P 500, would be to consider the S&P Paris-Aligned benchmark variant. The Lyxor S&P 500 Paris-Aligned Climate (EU PAB) (DR) ETF is compatible with the Paris Agreement’s most ambitious 1.5° warming scenario.

1.5°C

ESG indices can be ‘hot’

We’ve received several questions on why an ESG ETF can have a high temperature, or be ‘hotter’ than its parent index or comparable non-ESG ETF.

Taking the DAX 30 as an example: this index reflects a part of the German economy with high carbon intensity, due to the large share of coal in the German power sector and the high representation of power companies in this index.

However, the COtool shows that the DAX 30 is compatible with a 1.5°C temperature scenario, whereas the DAX 50 ESG benchmark is >3°C.  

1.5°C

1.5°C

The answer to this is that an index may have a very high carbon footprint today, and still be aligned with the Paris Agreement. The temperature reflects the fact that the index is on a pathway aligned with the Paris Agreement, not if it is carbon-intensive today.

In our example, the DAX 30 contains several big companies in the power sector. These companies are well known for having a lot of coal in their power mix. They are accountable for very high volumes of emissions, and therefore are excluded from ESG indices. But because they have taken strong commitments to reduce their emissions – even more ambitious than their expected SDA decarbonisation trajectory requires – they are 1.5°-aligned.  

Ultimately, the best way to understand this is by recognising that an ESG measure is fundamentally different from a temperature measure.

An ESG score evaluates an issuer on Environmental, Social and Governance aspects, while a temperature measure has a narrower focus on alignment against the goals of the Paris Agreement. A carbon-intensive company can still have a high rating on social and governance topics, which might compensate a low score on environmental side to give a strong ESG score.

If an ESG index methodology overweights issuers with high ESG scores, and if these are also unaligned with the Paris Agreement goals, it can lead to a high temperature, or a higher temperature than its parent index.

Some caveats

This is very much a moment-in-time snapshot. Temperatures can and will change in the coming months. There are a few reasons why that might be:

• Changes in the fund composition and weightings in the fund

• Variations of enterprise value among issuers in the fund (fluctuations of their market capitalisations, increase or decrease of their debt, available cash, etc.)

• Effective reduction of emissions of issuers in the fund

• Change in theoretical carbon budgets from updated climate scenarios

• Expansion of Trucost database with new data for issuers that were not covered until now


Note that a decrease of a fund temperature is not necessarily due to a real reduction of emissions of issuers in a fund. An increase is not necessarily due to higher emissions.

The COtool does not yet consider what are known as ’scope 3 emissions’. Scope 3 refers to indirect GHG emissions that are a consequence of the company’s activities, but which come from sources not owned or controlled by the company.

For some sectors such as automotive and oil & gas, scope 3 emissions represent a major part of the sector’s emissions and taking them into account to evaluate alignment in these sectors is necessary to get a true picture of their carbon intensity.

Unfortunately, there is incomplete reporting of scope 3 emissions by companies, it’s hard to model these emissions, and climate scenarios used for target-setting do not yet integrate scope 3 emissions in transition pathway forecasts.

To fulfil the COtool’s potential, we are working to integrate scope 3 emissions in our methodology in 2021 for automotive and oil & gas.

That’s all for this update. Send us any questions or comments you have on the tool and we’ll try to answer them in a future blog.

Discover our new COtool or explore our range of Climate-focused ETFs

Risk Warning

This document is for the exclusive use of investors acting on their own account and categorised either as “Eligible Counterparties” or “Professional Clients” within the meaning of Markets in Financial Instruments Directive 2014/65/EU. These products comply with the UCITS Directive (2009/65/EC). Société Générale and Lyxor International Asset Management (LIAM) recommend that investors read carefully the “investment risks” section of the product’s documentation (prospectus and KIID). The prospectus and KIID are available free of charge on www.lyxoretf.com, and upon request to client-services-etf@lyxor.com.

Except for the United-Kingdom, where this communication is issued in the UK by Lyxor Asset Management UK LLP, which is authorized and regulated by the Financial Conduct Authority in the UK under Registration Number 435658, this communication is issued by Lyxor International Asset Management (LIAM), a French management company authorized by the Autorité des marchés financiers and placed under the regulations of the UCITS (2014/91/EU) and AIFM (2011/61/EU) Directives. Société Générale is a French credit institution (bank) authorised by the Autorité de contrôle prudentiel et de résolution (the French Prudential Control Authority).

The products mentioned are the object of market-making contracts, the purpose of which is to ensure the liquidity of the products on the London Stock Exchange, assuming normal market conditions and normally functioning computer systems. Units of a specific UCITS ETF managed by an asset manager and purchased on the secondary market cannot usually be sold directly back to the asset manager itself. Investors must buy and sell units on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units and may receive less than the current net asset value when selling them. Updated composition of the product’s investment portfolio is available on www.lyxoretf.com. In addition, the indicative net asset value is published on the Reuters and Bloomberg pages of the product, and might also be mentioned on the websites of the stock exchanges where the product is listed.

Prior to investing in the product, investors should seek independent financial, tax, accounting and legal advice. It is each investor’s responsibility to ascertain that it is authorised to subscribe, or invest into this product. This document is of a commercial nature and not of a regulatory nature. This material is of a commercial nature and not a regulatory nature. This document does not constitute an offer, or an invitation to make an offer, from Société Générale, Lyxor Asset Management (together with its affiliates, Lyxor AM) or any of their respective subsidiaries to purchase or sell the product referred to herein.

Research disclaimer

Lyxor International Asset Management (“LIAM”) or its employees may have or maintain business relationships with companies covered in its research reports. As a result, investors should be aware that LIAM and its employees may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see appendix at the end of this report for the analyst(s) certification(s), important disclosures and disclaimers. Alternatively, visit our global research disclosure website www.lyxoretf.com/compliance.

Conflicts of interest 

This research contains the views, opinions and recommendations of Lyxor International Asset Management (“LIAM”) Cross Asset and ETF research analysts and/or strategists. To the extent that this research contains trade ideas based on macro views of economic market conditions or relative value, it may differ from the fundamental Cross Asset and ETF Research opinions and recommendations contained in Cross Asset and ETF Research sector or company research reports and from the views and opinions of other departments of LIAM and its affiliates. Lyxor Cross Asset and ETF research analysts and/or strategists routinely consult with LIAM sales and portfolio management personnel regarding market information including, but not limited to, pricing, spread levels and trading activity of ETFs tracking equity, fixed income and commodity indices. Trading desks may trade, or have traded, as principal on the basis of the research analyst(s) views and reports. Lyxor has mandatory research policies and procedures that are reasonably designed to (i) ensure that purported facts in research reports are based on reliable information and (ii) to prevent improper selective or tiered dissemination of research reports. In addition, research analysts receive compensation based, in part, on the quality and accuracy of their analysis, client feedback, competitive factors and LIAM’s total revenues including revenues from management fees and investment advisory fees and distribution fees.

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