Finnish pension insurance company Ilmarinen was the driving force behind the world’s largest ETF launch, prompting the creation of a new passive equities investment fund based on MSCI’s USA Climate Action Index and anchoring its launch with €1.86bn of investment.

DWS, the asset manager behind the Xtrackers MSCI USA Climate Action Equity ETF, said yesterday’s investment of approximately $2bn on the first day of trading made the instrument the largest ETF launch of all time in the US, and also the single largest climate-investing ETF launch.

Mikko Mursula, chief investment officer of the €56.3bn Finnish earnings-related pension provider, said: “This fund will cost-effectively provide us with a broad diversification into the best US listed companies in terms of the climate. In addition, the fund supports us in our goal of a carbon-neutral investment portfolio by the end of 2035.”

The new MSCI USA Climate Action Index – launched last autumn – uses climate indicators to include the “better” half of the large and medium-sized companies listed in the US for each industry, according to Ilmarinen.

Mursula said the ETF allowed Ilmarinen to manage climate risk, get exposure to transition-related opportunities and align with its climate goals.

Ilmarinen, which aims for a carbon-neutral portfolio by the end of 2035, made the ETF investment by swapping assets into the new vehicle from an Xtrackers ETF fund it had also helped start in March 2019.

Since then, when Ilmarinen invested more than €700m in the Xtrackers MSCI USA Leaders Equity ETF, those assets have tripled to €1.86bn, amounting to 7% of the institutional investor’s total equity portfolio.

The bulk of that portfolio – €17bn of listed equities – has already been benchmarked to the new MSCI Climate Action index starting in December, having moved from the ESG benchmark indices previously used for Ilmarinen’s internally-managed equity investments.

The Helsinki-based provider explained that previous experience working with index and ETF providers to build and market such passive vehicles had given it the confidence needed for a collaboration on the scale announced yesterday.

Senior portfolio manager Juha Venäläinen told IPE: “We have built the experience during the process in 2019 and now we are happy with the relationships and the processes.”

Ilmarinen has also worked with different providers, anchoring many different ETF launches over the last few years, and Venäläinen said all of that experience had helped with the latest launch.

“There are no issues there. But we are not launching ETFs for the sake of it – we wanted to have exposure to the MSCI Climate Action index, and up to now, there has been no ETF out that would follow this,” he said.

DWS said in a statement that the size of the new ETF launch underscored ”continued investor demand for sustainable investment solutions”.

The past year has seen a backlash in the US, largely from Republican politicians, against ESG investing by public-sector entities with critics arguing that taking ESG factors into account could hit returns to investors.

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