Australian provider of Australian Securities Exchange (ASX)-traded corporate bonds XTB has launched a new fixed income portfolio of environmental, social and governance (ESG)-approved in response to growing demand from SMSFs for ethical investments.
The XTB Emerald Fixed Income Portfolio is a managed portfolio of individual bond units, also known as XTBs.
The underlying bonds are issued by some of Australia’s top companies that have met The Emerald Club’s – a responsible investment platform – screening criteria.
Bloomberg ESG data is used to select companies with a strong track record of mitigating ESG risks relative to alternatives.
XTB co-founder and chief executive Richard Murphy said SMSFs, in particular, have a strong desire to know who they are investing with, which is why they have a preference for direct investments.
Creating a portfolio of ASX-traded individual bond units screened for ESG allows SMSFs to better align their investments with their values, he said.
“We hear from many advisory groups who have clients, including SMSFs, whose personal values align with ESG and/or ‘green investing’,” Murphy told selfmanagedsuper.
“To date, equity portfolios have led the way in this area, based on companies whose stated values aligned with those of the investor.
“The fixed income market has followed this lead with specific bond issues aimed at values-based investors.”
The portfolio provides SMSF trustees with a regular and predictable income stream, with an investment risk profile lower than equities and hybrids, and a higher return than cash-like investments.
It has an absolute return objective of 1 per cent higher than the cash rate.
The portfolio is available on the Hub24 platform.
“The portfolio is comprised of companies which are able to provide viable returns to investors while at the same time, mitigating the environmental and social impacts of their business activity, operating in a manner respectful of society and managing within emerging ecological constraints,” Murphy added.
“It helps advisers and their SMSF clients to match their investments with their values.
“We’re very happy to team up with Hub24 and The Emerald Club to provide the ESG portfolio in a separately managed account (SMA) to help meet the investment values of a growing number of ESG investors.”
Ethical Investment Advisers principal financial adviser Karen McLeod said SMSF trustees are increasingly seeking value-aligned investments and the XTB portfolio addressed this growing demand for ESG fixed income options.
“We are excited to see new developments in the ESG space, particularly fixed income,” McLeod said.
“SMAs of XTBs provide that next level of engagement and transparency that we have been looking for.”
XTBs generated significant interest from investors during 2017, with funds under management up 117 per cent to $265 million, from $122 million in 2016.