Royal London to launch carbon-tilt ETFs in September

Royal London, the UK’s largest mutual life, pensions and investment company, will list four carbon-tilt exchange-traded funds on the London Stock Exchange in September. The firm plans later registrations to sell the ETFs across Europe, including Germany and Switzerland, using UCITS rules.

The funds will track market-cap benchmarks for US, UK, Europe ex-UK and global equities and then apply a carbon tilt based on Royal London’s assessment of each company’s carbon transition plans. The group says the ETFs target a portfolio carbon footprint about 10% lower than their reference indices while keeping tracking error small.

Royal London’s asset management arm created the ETFs from strategies that already exist elsewhere in the group. The firm describes the products as slightly active, or “beta plus,” aiming to combine active carbon-aware stock selection with passive ETF fee levels.

Steve Palmer joined Royal London earlier this year as Head of ETF Solutions. He previously worked on market-making and markets and securities services sales for ETF issuers and brings experience of secondary market trading and primary market processes. Palmer said, “ETFs have massively changed in 20 years, and the innovations have increased the cost pressures and focus on precision.” He added that his sell-side background helps design products that perform in both primary and secondary markets.

Palmer pointed to structural limits in the UK that have restricted ETF uptake. Many UK retail platforms are configured for traditional funds and do not support intraday trading or fractional shares, which complicates ETF distribution through pension and ISA platforms. He contrasted that with Germany, where simplified savings plans and broad broker and bank support have helped about 10 million people use ETFs. Germany’s upcoming pension reform, AVD, is expected to increase demand for ETFs there.

Royal London plans initial listings on the London exchange in September before completing registration and distribution steps across key European markets. The group manages about £199 billion in assets and is customer-owned, rather than shareholder-owned.