Legal and General Investment Management has launched the L&G Future World ESG Emerging Markets Government Bond Local Currency Index fund.
LGIM said it is the first of three set to be launched by the firm in the coming months.
Legal and General said alongside the usual environmental, social and governance factors the funds will include a fourth pillar known as geopolitical stability/risk.
The new funds meet Article 8 requirements, meaning they promote environmental or social characteristics but do not have specific sustainable investment objectives.
Lee Collins, LGIM’s head of the index fixed income desk, said: "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 and 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.”
The new bond draws on research by the World Bank which shows “ingrained income bias” the ESG scores for funds.
It will introduce wealth bands to the range which it believes will level the playing field.
As a result, it claims the range will provide investors with exposure to sovereign debt with deeper ESG integration.
The L&G Future World ESG Emerging Markets Government Bond Local Currency Index fund will be immediately available to institutional investors in the UK, and to those investors in the Netherlands, Germany and Sweden by the end of 2023.
tara.o'connor@ft.com
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