LGIM launches ESG government bond funds

Legal and General Investment Management has launched a suite of ESG government bond funds.

The new funds are the L&G Future World ESG Emerging Markets Government Bond Local Currency Index Fund, the L&G Future World ESG Developed Markets Government Bond Index Fund and the L&G Future World ESG Emerging Markets Government Bond (USD) Index Fund. The latter two will be launched in the next few months.

The funds will incorporate a new proprietary fourth ESG pillar, referred to as “geopolitical stability/risk” which aims to provide a more comprehensive risk assessment of investing in government debt. LGIM also says that the funds methodology will look to eliminate income bias that impacts sovereign ESG scores. The funds will also employ ‘wealth bands’ which apply tiered thresholds for exclusions based on different levels of country income. As a result, says LGIM, the funds in the range aim to provide investors with exposure to sovereign debt with deeper ESG integration, factoring in forward-looking sovereign risk factors and adjusting for wealth bias.

The funds have been categorised as Article 8 under the Sustainable Finance Disclosure Regulation.

Lee Collins, Head of Index Fixed Income, Legal & General Investment Management, says,  ‘’Following 18 months of research and development, we are delighted to be launching our first, LGIM designed, Index fixed income Sovereign ESG products, collaborating with industry leaders like JP Morgan & Verisk Maplecroft to bring this to market. Whilst ESG integration in equities and corporate bonds exposures is a well-trodden path, it’s fair to say that developments in the Sovereign ESG sector have lagged behind. We believe that with several unique features, these new products will offer investors a deeper ESG integration in the asset class.”