The Evolution of ESG

Investor-led focus on integrating ESG risk and opportunity factors in our process

Active approach to proxy voting, including in our passive strategies

Positive relationship between ESG performance and share price performance

Strategies available in simple, low cost, transparent and efficient ETF structure

Aiming to uphold principles without sacrificing performance

Responsible Investing is becoming more mainstream as demand increases for strategies that incorporate ESG factors into their investment process. The drivers come from regulatory pressure, demographic shifts such as the growing influence of millennials, and the greater availability of corporate data on ESG issues. More generally, investors want their investments to align with their own values, especially if it offers the potential for better risk-adjusted performance.

The different elements of ESG

 

It’s easy to define what the E, S and G mean in isolation, but when put together, the term “ESG” could mean very different things to different people. What one investor is looking to achieve from their investment may be entirely different from what someone else wants. Neither is right or wrong, but it’s important to make a distinction between strategies that integrate ESG and those that do not.

 

 

You can also combine these elements into a single strategy, for example excluding certain securities based on ethical criteria and integrating ESG considerations into the filtered index, at which point performance becomes the primary objective.

 

ESG performance and financial performance are connected

An integrated strategy will use ESG-related factors typically as qualitative measures alongside more traditional financial metrics to value a company. By understanding ESG factors, an analyst can more accurately assess the risks within a company and gauge how successfully management deals with risks. In addition, ESG analysis can help identify opportunities for future revenues.

A company with a strong ESG profile could have certain characteristics that flow through to greater profitability and lower risks.

Invesco’s approach to ESG

At Invesco, we’ve been implementing ESG strategies for more than 30 years, with an approach that is both investor-led and investor-driven. We integrate ESG risk and opportunity factors directly into our investment decisions across asset classes, both in active and increasingly in passive strategies. We believe this can help us deliver superior investment outcomes for our investors.

Size matters when you need a big voice and being one of the largest asset managers in the world provides our passive ETF investors with an opportunity to make a real difference1. Proxy voting is an integral part of our investment process, for active and passive strategies. Our aim is to encourage the companies in which we invest to adopt best-in-class ESG practices. We believe that the right to vote proxies should be managed with the same care as all other elements of the investment process. We vote for proposals that we believe can maximize long-term shareholder value.

1Assets under Management: US$1,159.3 billion (31 May 2019)

Our voting activity, in numbers (2018)

Find out more (download our 2018 Investment Stewardship and Proxy Voting Annual Report)

Find out more about Invesco’s ESG history and approach

 

The advantages of Invesco ETFs

Our commitment to building ETFs that best meet the needs of our investors starts and ends with understanding what is important for our investors. The attractions of investing in an ESG strategy through our ETF structure include:

Transparency – the entire list of holdings published daily on our website.

Ease of access – shares can be bought and sold on a stock exchange throughout the day.

Cost-effectiveness – core ESG exposure that doesn’t cost the Earth.

Physical replication – investing directly in the securities gives us voting rights. We believe proxy voting is an important and integral part of any ESG investment.

About our ESG ETFs

ETF Invesco MSCI ESG Universal Screened UCITS ETFs Invesco Quantitative Strategies ESG Global Equity Multi-Factor UCITS ETF
Strategy Passive; broad exposure Active; concentrated exposure
Investment objective

To provide the performance of the relevant MSCI ESG Universal Select Business Screens index

To achieve superior long-term returns compared to those of the MSCI World Index2
Replication method Physical Physical
Negative screens (exclusions) Avoid companies involved in certain controversial business practices or that do not have an ESG score Avoid companies involved in certain controversial business practices or that do not have an ESG score
Positive screens  N/A “Best in class” ESG criteria
Weighting method Increase overall exposure to those companies demonstrating both a robust ESG profile as well as a positive trend in improving that profile Optimise portfolio with the aim of maximising exposure to Value, Quality, Earnings Momentum and Price Momentum factors, while targeting a risk profile consistent with the fund’s investment objective
Geographic exposure(s) World, Europe and USA Global

2 The ETF will not seek to track the performance of an index. The ETF will hold an actively-managed portfolio of equities with the aim of delivering superior risk-adjusted returns over the long term.

Investment risks

The value of investments, and any income from them, will fluctuate. This may partly be the result of changes in exchange rates. Investors may not get back the full amount invested.

Important information

This information is for discussion purposes only, and is intended only for professional investors in Ireland, the UK, Germany, Spain, Finland, Italy, Luxembourg, the Netherlands, Norway, Sweden, Denmark, Austria, Qualified Clients in Israel, and Qualified Investors in Switzerland. Marketing materials may only be distributed in other jurisdictions in compliance with private placement rules and local regulations.

Data as at 22 July 2019, unless otherwise stated.

All investment decisions must be based only on the most up to date legal offering documents. The legal offering documents (fund and share class specific Key Investor Information Document (KIID), prospectus, annual & semi-annual reports, articles & trustee deed) are available free of charge on our website etf.invesco.com and from the issuers.

This document should not be considered financial advice. Persons interested in acquiring the product should inform themselves as to (i) the legal requirements in the countries of their nationality, residence, ordinary residence or domicile; (ii) any foreign exchange controls and (iii) any relevant tax consequences.

UCITS ETF’s units / shares purchased on the secondary market cannot usually be sold directly back to UCITS ETF. Investors must buy and sell units / shares 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 / shares and may receive less than the current net asset value when selling them.

The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or securities or any index on which such funds or securities are based. The prospectus contains a more detailed description of the limited relationship MSCI has with Invesco and any related funds.

For the full objectives and investment policy please consult the current prospectus.

German investors may obtain the offering documents free of charge in paper or electronic form from the issuer or from the German information and paying agent (Marcard, Stein & Co AG, Ballindamm 36, 20095 Hamburg, Germany).

The representative and paying agent for the sub-funds of Invesco Markets plc and Invesco Markets II plc in Switzerland is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich, Switzerland. The offering documents, articles of incorporation and annual and semi-annual reports may be obtained free of charge from the representative in Switzerland. The ETFs are domiciled in Ireland.

In Switzerland, the Invesco Quantitative Solutions ESG Global Equity Multi-Factor UCITS ETF is not registered for distribution with the Swiss Financial Market Supervisory Authority ("FINMA"). This document and any document relating to this/these products may be made available in Switzerland solely to Qualified Investors.

Communicated by Invesco UK Services Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire, RG9 1HH, authorised and regulated by the Financial Conduct Authority, Invesco Asset Management SA, 16-18 rue de Londres, 75009 Paris, France, Invesco Asset Management Deutschland GmbH, An der Welle 5, 60322 Frankfurt am Main, Germany, and Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire, RG9 1HH, United Kingdom. Authorised and regulated by the Financial Conduct Authority.

EMEA 5256/2019