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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, , of the protections provided by the Danish regulatory system generally and for funds authorised in Denmark do not apply to these exchange traded funds (ETFs).


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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.




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 Information given about the past performance of the funds is no guarantee of future performance. No investment decision should be taken without reading the fund prospectus and any fund supplement of the fund concerned.


Although the content of the website is based upon information that LIAM consider reliable or comes from sources that LIAM consider reliable, LIAM have not verified such information. Lyxor 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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August, 2015





17 May 2021

Financing the future: how bond markets can help build a better world

The businesses you choose to invest in today will build the world we all live in tomorrow. Help create the future you want for those you advise, and those you love.

Climate change. Corporate scandal. Changing public attitudes. Investors today must grapple with a unique mix of challenges – ones that make climate action, good corporate governance, and social responsibility more important than ever in their portfolios.

That’s why environmental, social and governance (ESG) investing has become so important in recent years. For investors of all sizes, ESG increasingly holds the key to managing risks and making better long-term investment decisions. The greatest challenge investors face today is how to incorporate these three letters into their investment process.

For much of its history, ESG was the domain of equity investors. ESG research within fixed income didn’t receive the same level of attention. But more recently, the research has been moving at a blistering pace – and the supportive data has finally caught up.

Today there’s a €100trn opportunity1 for investors, big and small, to unleash the transformative power of fixed income and change the world for the better. In this blog, we’re going to examine this opportunity, and demonstrate two ways to approach it.

Bonds are powerful tools for change

Exciting stories about big-name companies keep us tuned in to podcasts and visiting news sites. But the bond market, less discussed outside of the financial press, is arguably more important than its more newsworthy peer given its larger size (by market value).  

Millions of investors use bonds to diversify their risk and reduce volatility. They are a central part of governmental and corporate funding – not to mention the bread-and-butter investment for some of the world’s biggest asset managers, such as pension funds and insurers.

There is a huge amount of money in the bond market. More than 25x the entire yearly US Federal Budget, in fact1. That money has transformative power – power which, if unlocked, would undoubtedly improve the world we live in. Policymakers recognise this potential. That’s why policies and regulation have been changing to encourage a major shift towards responsible investments.

For example, the EU Action Plan was created to build a sustainable future for Europe, the Sustainable Finance Disclosure Regulation (SFDR) was rolled out to tackle the “greenwashing” of financial products, and Article 173 in France requires institutional investors to better report ESG and climate-related considerations in their investment process.

If these initiatives successfully shift the huge pools of money into highly ESG-rated, climate-friendly companies, we expect ‘ESG leaders’ to see their cost of financing go down, enabling them to do more good work and grow. The climate-polluting, poorly-governed ‘ESG laggards’ will get less money from investors, increasing their cost of funding and encouraging them to change their behaviour. A virtuous circle should be the result.

A shift of this scale could radically improve the world we live in. Investors will earn their returns with a clear conscience, knowing they are helping to build a world fit for future generations. Best of all, any investor can join this movement and play a part in securing the safety of our planet.

Changing our unsustainable path

There’s no doubt that companies, governments, and even whole societies today are squaring up to a host of urgent environmental, social and governance challenges.

The most obvious of them is the ‘E’ of the environment. The threat of global warming demands an immediate revolution to reduce carbon emissions, and investors increasingly recognise their responsibility to fight climate change by ‘shifting the trillions’ into climate-friendly companies and investments. Furthermore, governments’ regulations to address climate change will have a negative impact on operational costs and demand for carbon-intensive products such as fossil fuel-based energy production or coal mining.

But ESG is about more than the environment. It ties together different factors to give an overall picture of sustainability and societal impact. Companies must better manage their carbon emissions, resource consumption, and waste production. Investors increasingly recognise that they should also commit to eliminating exploitative practices, such as child labour and modern slavery, in their business and supply chain. They should manage their relationships constructively with local communities wherever they operate, promote diversity and support health and safety. These beliefs find their place in the ‘S’ of social issues, which left unaddressed can impact credit worthiness.

Then there is the ‘G’ of corporate governance – how companies manage themselves. If a company governs itself poorly, there can be a disastrous impact on their reputation, performance, and stock price. Look no further than the Wirecard or Wells Fargo scandals for evidence. Whether it’s executive pay, bribery and corruption, fraud, director independence, board diversity, or tax structure, ‘G’ factors are a key consideration for responsible investing, and they can have strong links to credit strength.

As we’ve seen, until recently, investors were only really able to address these issues with their equity allocations. But that is all changing.

Make a difference with your bond investments

There’s a useful shorthand for ‘bonds that make a difference’: sustainable bonds. This term includes several approaches to fixed income investing that can contribute to positive ESG or climate outcomes.

As an ETF provider, we offer two main routes to responsible bond investing that align with the tenets of rules-based indexing – transparency, diversification and liquidity.

ESG bonds start with a mainstream corporate bond benchmark used by investors worldwide and already invested with billions of euros – known as the “parent index”. Then, a sustainability screen is applied which takes into account environmental, social, and governance standards. This screen (or filter) excludes any bonds issued by companies with poor ESG ratings, or who are subject to very severe scandals, or involved in controversial business such as weapons, tobacco, thermal coal and unconventional oil and gas, to name just a few. The result? A “best in class” selection of bonds issued by companies who have proven their ESG credentials.

Green bonds take a different approach. The proceeds of green bonds are certified as going purely towards eco-friendly projects. Green bond investors therefore have a keen interest in how the money raised by that bond will be used. It’s worth highlighting that all kinds of companies can issue green bonds to finance their own low-carbon transition, from tech companies, to financial institutions, to automakers. Through this ‘use of proceeds’ rule, investors in green bonds can take comfort in knowing they are financing truly ‘green’ activities. We will look into how this works in practice in more detail in a future blog.

Now let’s examine how you could use them in a portfolio.

  1.  ​​1.  ESG corporate bonds

  • Traditional investment grade or high yield corporate bonds with an ESG filter
  • Core allocation that excludes poorly-rated companies on E, S and G factors
  • Potential to reduce risk without creating major biases or performance disconnects from the parent index

Verdict: ESG corporate bonds can be slotted into a portfolio exactly where traditional non-ESG bonds are now. For many investors, that makes credit screened by “best in class” issuers the natural choice to start integrating ESG factors into the investment process. Our research indicates that the extra ESG screen has the potential to improve risk-adjusted returns while being very asset-allocation friendly, as an existing core credit holding can be switched practically like-for-like.

We chose Bloomberg Barclays, a well-known leader in fixed income benchmarks, as the index provider for our sustainable corporate bond range. Furthermore, the ESG screen in our chosen indices harnesses data from MSCI, a global leader in ESG research. Together we believe these two data powerhouses are an ideal match for getting a dependable and sustainable exposure to investment grade and high yield bond markets. Our ESG credit ETFs are also compliant with Article 8 of the EU’s SFDR as they promote environmental or social characteristics.

2.  Green bonds

  • Make an impact as bond proceeds are guaranteed to be used in pro-climate projects across numerous sectors
  • Retain the same characteristics as traditional bonds from the same issuer, such as credit rating
  • ‘Use of proceeds’ rule is vetted by the independent Climate Bonds Initiative (CBI), a leader in green bond research

Verdict: Green bonds are a powerful approach to make a direct climate impact within a bond allocation. The ‘use of proceeds’ rule sounds simple, yet it has transformative power to build a better world by mobilising finance towards impactful green projects and assets, the eligibility of which is determined by a strict taxonomy defined by the CBI. To illustrate: in Lyxor’s flagship Green Bond ETF launched in 2017, last year’s three most popular uses for its proceeds were Energy, Green Buildings, and Clean Transport – three crucial components for a more sustainable future.

Our green bond ETF was the first of its kind in the world, and has grown to over €500m in assets. In 2019, it was awarded the Greenfin label, a certification for private investments in a green economy introduced by the French government. Our green bond ETFs are also compliant with Article 9 of the EU’s SFDR as they have a specific sustainable investment objective. 

We have more capital available on the planet now than ever before in history. And large slabs of it are in negative or zero interest rate yields. (...) We need to shift that capital into places where it can get some kind of return.And that's going to be green.

Sean Kidney. CEO of the Climate Bonds Initiative

We have the tools – now we must use them

It’s time to be on the right side of change. The day is coming when a company’s fortunes will depend as much on the size of its carbon footprint, the global warming scenario it implies, and its willingness to address broader societal issues, as its ordinary financial metrics.

Whether you want to improve performance, reduce risk, or just invest with a clear conscience, the tremendous advances in ESG data now allow you to do so much more with your bond allocation.

Canadian ice-hockey legend Wayne Gretzky was once asked the secret to his success. He replied: “I skate to where the puck is going to be, not where it has been.” The best investment decisions look to the future. There has never been a better opportunity to skate to where the puck is going – to finance the future with sustainable bonds, get ahead of the curve, and help build a better world.

In the coming weeks, we will take a closer look at these two ways to finance a better future with bonds. If this is a topic that interests you, stay tuned for more.

Our ESG credit ETFs at a glance

Our green bond ETF range at a glance

Did you know? 

Most of our ETFs now come with a temperature score, helping you understand the implied temperature rise of your investments, and helping you build a portfolio compatible with a low-warming future for the planet. 

To learn more, head to our new COtool, where you can find temperature scores for those equity and corporate bond ETFs for which the data on the underlying indices is sufficient to reliably assign such scores. 

This article is for informative purposes only, and should not be taken as investment advice. Lyxor ETF does not in any way endorse or promote the companies mentioned in this article. Capital at risk. Please read our Risk Warning below.

Global bond market approximately $128trn (ICMA, 2020), 2020 US Federal Budget $4.76trn

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, and upon request to

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 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

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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