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A professional client is a client that is either a per se professional client or an elective professional client  (Note article 4 (1) 12 of Mifid )

 

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The above definition is only an extract and is not exhaustive. For further details please refer to the Glossary section of the FCA Handbook: https://www.handbook.fca.org.uk/handbook/glossary/

 

 

Lyxor and Lyxor ETF are names used by Lyxor Asset Management UK LLP to promote the products of Lyxor International Asset Management. Although information contained herein is from sources believed to be reliable, Lyxor UK makes no representation or warranty regarding the accuracy af any information. Any reproduction, disclosure or dissemination of these materials is prohibited. This site is maintained by Lyxor UK, SG House, 41 Towar Hill, London EC3N 4SG.

 

 

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Lyxor UCITS compliant Exchange Traded Funds (Lyxor UCITS ETFs) referred to on this website are open ended mutual investment funds (i) established under the French law and approved by the Autorité des Marchés Financiers (the French Financial Markets Authority), or (ii) established under the Luxembourg law and approved by the Commission de Surveillance du Secteur Financier (the Luxembourg Financial Supervisory Committee). Most, if not all, of the protections provided by the UK regulatory system generally and for UK authorised funds do not apply to these exchange traded funds (ETFs). In particular, investors should note that holdings in this product will not be covered by the provisions of the Financial Services Compensation Scheme, or by any similar scheme in France.

 

This website is exclusively intended for persons who are not "US persons", as such term is defined in Regulation S or the US Securities Act 1933, as amended, and who are not physically present in the US. This website does not constitute an offer or an invitation to purchase any securities in the United States or in any other jurisdiction in which such offer or invitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Potential users of this website are requested to inform themselves about and to observe any such restrictions.

 

 

 

 

Index Replication Process

 

Lyxor UCITS ETFs follow both physical and synthetic index replication process.

 

However, most Lyxor UCITS ETFs follow synthetic replication process. This consists of entering into a derivative transaction (a ‘Performance Swap’, as defined below) with a counterparty that provides complete and effective exposure to its benchmark index. Lyxor has adopted this methodology in order to minimise tracking error, optimise transaction costs and reduce operational risks.

 

A Performance Swap is a contractual agreement which is negotiated over-the-counter (OTC) between two parties: the Lyxor UCITS ETF and its counterparty. From a risk perspective, each Performance Swap ranks equally with other senior unsecured obligations of the counterparty, such as common bonds (i.e., same rights to payments). In the Performance Swap, the counterparty of the Lyxor UCITS ETF commits to pay the Lyxor UCITS ETF a variable return based on a pre-determined benchmark index, instead of a fixed stream of income (as in bonds). At the same time, the counterparty will receive from the Lyxor UCITS ETF the performance and any related revenues generated by the basket's assets (excluding the value of the Performance Swap) held by the Lyxor UCITS ETF. Information provided on individual ETFs includes data on the basket relating to the ETF and the percentage value of the basket represented by each asset. The information is relevant to the closing values on the date given. 

 

Investment Risks

 

The Lyxor UCITS ETFs described on this website are not suitable for everyone. Investors' capital is at risk. Investors should not deal in this product unless they understand, having obtained independent professional advice where necessary, its nature, terms and conditions, and the extent of their exposure to risk. The value of the product can go down as well as up and can be subject to volatility due to factors such as price changes in the underlying instrument and interest rates. If a fund is quoted in a different currency to the index, currency risks exist.

 

Prior to any investment in any Lyxor UCITS ETF, you should make your own appraisal of the risks from a financial, legal and tax perspective, without relying exclusively on the information provided by us. We recommend that you consult your own independent professional advisors (including legal, tax, financial or accounting advisors, as appropriate).

 

Specific Risks

 

·         Capital at Risk. ETFs are tracking instruments: Their risk profile is similar to a direct investment in the Benchmark Index. Investors’ capital is fully at risk and investors may not get back the amount originally invested. Investments are not covered by the provisions of the Financial Services Compensation Scheme (“FSCS”), or any similar scheme.

·         Counterparty Risk. Investors may be exposed to risks resulting from the use of an OTC Swap with Societe Generale. Physical ETFs may have Counterparty Risk resulting from the use of a Securities Lending Programme.

·         Currency Risk. ETFs may be exposed to currency risk if the ETF or Benchmark Index holdings are denominated in a currency different to that of the Benchmark Index they are tracking. This means that exchange rate fluctuations could have a negative or positive effect on returns.

·         Replication Risk. ETFs are designed to replicate the performance of the Benchmark Index. Unexpected events relating to the constituents of the Benchmark Index may impact the Index provider’s ability to calculate the Benchmark Index, which may affect the ETF’s ability to replicate the Benchmark Index efficiently. This may create Tracking Error in the ETF.

·         Underlying Risk. The Benchmark Index of a Lyxor ETF may be complex and volatile. When investing in commodities, the Benchmark Index is calculated with reference to commodity futures contracts which can expose investors to risks related to the cost of carry and transportation. ETFs exposed to Emerging Markets carry a greater risk of potential loss than investment in Developed Markets as they are exposed to a wide range of unpredictable Emerging Market risks.

·         Liquidity Risk. On-exchange liquidity may be limited as a result of a suspension in the underlying market represented by the Benchmark Index tracked by the ETF; a failure in the systems of one of the relevant stock exchanges, Societe Generale or other Market Maker systems; or an abnormal trading situation or event.

 

The securities can be neither offered in nor transferred to the United States.

 

Tax

 

Any statement in relation to tax, where made, is generic and non-exhaustive and is based on our understanding of the laws and practice in force as of the date of this document and is subject to any changes in law and practice and the interpretation and application thereof, which changes could be made with retroactive effect. Any such statement must not be construed as tax advice and must not be relied upon. The tax treatment of investments will, inter alia, depend on an individual’s circumstances. Investors must consult with an appropriate professional tax adviser to ascertain for themselves the taxation consequences of acquiring, holding and/or disposing of any investments mentioned on this website. 

 

Further information on the risk factors are available in the [Risk Warning – link to risk page] section of the website.

 

Any fund prospectus and supplements are available at www.lyxoretf.co.uk. Information given about the past performance of the funds is no guarantee of future performance. No investment decision should be taken without reading the Legal Documents relating to the particuler Exchange Traded Fund concerned. A copy of the Legal Documents may be obtained from Lyxor UK at SG House, 41 Tower Hill, London EC3N 4SG upon request. 

 

Although the content of the website is based upon information that Lyxor UK consider reliable or comes from sources that Lyxor UK consider reliable, Lyxor UK has not verified such information. Lyxor UK make no representation or warranty as to the accuracy, completeness or adequacy of any information.  Any reproduction, disclosure or dissemination of the materials available on the website is prohibited.

 

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13 May 2021

Green bonds: How investors made an impact in 2020 with our ETF 

If more evidence of the extraordinary pace of climate change was needed, 2020 provided it in abundance. Arctic sea ice coverage matched 2016 for the lowest amount on record. Global temperatures were the second hottest ever, pushing 2019 down to third place. Meanwhile, satellite data revealed that CO2 concentrations continued to rise despite the pandemic, reaching a global level not seen for up to 5 million years.1  

Yet for all the alarming statistics on global warming, humanity still has a major opportunity to limit climate change before it’s too late. Scientific research has yielded +1.5°C as the point after which there would be a significant negative impact on the environment and climate patterns. That’s why this target was codified in the Paris Agreement in 2015. 

“Scientists agree that to get on track to limit global temperature rise to 1.5°C, emissions must drop rapidly to 25 gigatons by 2030,” says the UN Environment Programme. “Our challenge: based on today’s commitments, emissions are on track to reach 56 Gt CO2e by 2030.”

We’ve written several times in the past about green bonds – the impact-driven fixed income investments that have a major role to play in the climate transition. If you’d like a refresher, please see our previous blogs here and here. For now, it’s just worth remembering that green bonds were created to directly fund projects with positive environmental or climate benefits. 

If commitments, policies and action can deliver a 7.6% emissions reduction every year between 2020 and 2030, we CAN limit global warming to 1.5°C. This figure is our global solution.

UN Environment Programme

Green bonds are still a small part of the bond market, but they are growing fast. As we will explore in this blog, the rationale for including green bonds in portfolios is stronger today than ever. Read on to learn more about the green bond market and how our flagship green bond ETF performed in 2020. And imagine what could happen if we shifted the trillions in debt markets to greener investments.

A $1 trillion market for truly green finance

In December 2020, the green bond market crossed an important psychological threshold: $1 trillion of cumulative issuance since 2007, when the market was created. Issuance in 2020 alone was a record $290bn, according to the Climate Bonds Initiative (CBI)2, a not-for profit which aims to mobilise the bond market for climate change solutions. At the time of writing in 2021, cumulative issuance stands at $1.2 trillion and 2021 issuance at $124bn.3

Annual green bond

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As you can see from the CBI green bond score card (opposite), green bond issuance actually grew by 9% in 2020, despite the turbulence caused by Covid-19. Even though many green bond issues went ‘on pause’ at the height of the crisis, that pause created a backlog of green bond projects, which flooded into the market in the best-ever Q3 for green bonds. 

16
Total sovereign issuers after Egypt, Germany, Hungary and Sweden issued debut green bonds in 2020

​48%

Proportion of new issuance from Europe last year – the #1 source​

USA, Germany, France
The top 3 issuers of green bonds in 2020

Source: CBI Global State of the Market, 2020, https://www.climatebonds.net/resources/reports/sustainable-debt-global-state-market-2020 

To learn more about the growth of the green bond market, and how green bonds can be used in a fixed income portfolio, read our latest Expert’s View. 

How investors can make an impact with green bonds

The stats above suggest that green bonds are becoming more popular with investors. But how do they work? 

Lyxor Green Bond

The simplest way for us to illustrate the power of green bonds is to use our own flagship green bond ETF (Bloomberg ticker: CLIM) as an example. We’ve crunched the data (full report here), and this should give an idea of what investors can achieve with a green bond investment, and the vast impact we could have together if we successfully “shift the trillions”. 

It’s important to remember that most green bonds are based on the “use of proceeds” principle. This means that the funds raised (the proceeds) are earmarked to finance specific green projects (the use). UoP makes a green bond ETF a great choice to take direct climate action in a simple way, with the guarantee that your money goes to pro-environment projects.  

In 2020, the top three sectors that received proceeds from the Lyxor Green Bond (DR) UCITS ETF were Energy (45%), Green Buildings (24%) and Clean Transport (19%).4 

Energy Green buildings

Impact indicators for the Lyxor Green Bond (DR) UCITS ETF 

In 2020, even the relatively modest €550m invested in our green bond ETF achieved some amazing results in these sectors. As you can see below, 438k tonnes of CO2 equivalent emissions were avoided – that’s like taking nearly 95,000 passenger cars off the road for a year.** Enough renewable energy was funded to power nearly 28,000 homes,** and water was treated that would fill 16 Olympic-sized swimming pools.5

We are delighted that our investors made such a huge impact with our ETF in 2020.

CO2  Investors also supported 7 out of the 17 UN Sustainable Development Goals (SDGs), which aim to eradicate poverty, fight inequality and tackle climate change. Each goal has specific targets to be achieved by 2030, and project-oriented green bonds are uniquely placed to directly invest in the different objectives of the SDGs.

Exposure to UN Sustainable Development Goals by portfolio weight

Clean water


Watch ‘The impact of CLIM in 2020’ to see how our Green Bond ETF made a difference


Example project: E.ON case study

Here you can see a focus on two green bonds issued by E.ON and held by the ETF. Each issue avoided around 2,980,000 tonnes of CO2 equivalent. For a full selection of case studies and to understand our methodology, please read our full impact report here. 

pqge5

Project flaming

Take direct climate action with the Lyxor Green Bond ETF 

We strongly believe that green bonds are a powerful tool for making a climate and/or environmental impact with your investments.

In a recent UK poll, 77% of respondents considered climate change an important risk. But only 15% were investing for a greener, fairer society themselves6.  If you are one of them, a green bond ETF might help realign your portfolio with your philosophy.

Our flagship Green Bond ETF…

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…supports direct climate action with more than €500m in assets.

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…invests in over 400 green bonds approved by the Climate Bonds Initiative, ensuring each one adheres to the Green Bond Principles

green label

  

…is the first and largest global green bond ETF and first to receive the Greenfin label

EU

  

…and complies with Article 9 of the EU’s Sustainable Finance Disclosure Regulation (SFDR). 

We also offer an ESG-screened version (Bloomberg ticker: XCO2) that applies an additional issuer-level sustainability screen, excluding those involved in fossil fuels or nuclear power 

Our green bond ETFs at a glance 

We believe that green bonds are a crucial part of the climate transition and we’re fully behind the campaign to #shiftthetrillions in debt markets into green investments. You’ve seen what a positive impact can be achieved at a (relatively) small scale. Now imagine what more we could achieve if the vast potential of the bond market shifted to green investments! 

Please get in touch if you’d like to learn more, or visit our ESG Hub to explore Lyxor’s ESG and climate range. In the meantime, here is the full list of Lyxor green bond ETFs: 


https://public.wmo.int/en/media/press-release/carbon-dioxide-levels-continue-record-levels-despite-covid-19-lockdown
https://www.climatebonds.net/resources/reports/sustainable-debt-global-state-market-2020​ 
3 https://www.climatebonds.net/
Source: Lyxor Asset Management, March 2021 
Analysis by Lyxor Asset Management, March 2021. **These indicators concern 47% of the portfolio weight. Source of the conversion tool: https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator
​6
https://www.aegon.co.uk/content/ukpaw/news/climate_risk_is_keyconcernforsaversbutonly15saytheyinvestinesgfu.html

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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