Socially responsible equity themes have grown in popularity in recent years as investors align values with their investment objectives. VanEck has now launched the first green bond-related exchange traded fund to help investors fill out their fixed-income portfolios as well.
On Monday, VanEck rolled out the VanEck Vectors Green Bond ETF (NYSEArca: GRNB). GRNB has a 0.40% expense ratio.
Green bonds are debt securities issued to finance projects that promote climate change mitigation or adaptation or other environmental sustainability purposes. The new breed of green bonds gained momentum in global market ever since the European Investment Bank issued the first green bond in 2007, with $81 billion in green bonds issued in 2016 and an expected $150 billion to be issued in 2017, according to a note.
“Until now investors have had limited options for efficiently accessing ‘green’ fixed income exposure,” Ed Lopez, Head of ETF Product Management and Marketing with VanEck, said in a note. “We believe there’s demand for green bonds from ESG-focused investors, but there may be appeal to traditional fixed income investors as well. Green bonds are simply conventional bonds with an environmentally friendly use of proceeds. So, global bond investors can make an allocation to green bonds without significantly altering the risk and return profile of their portfolio.”
According to GRNB’s prospectus, Green bonds are debt whose “proceeds are used principally for climate change mitigation, climate adaptation or other environmentally beneficial projects, such as, but not limited to, the development of clean, sustainable or renewable energy sources, commercial and industrial energy efficiency, or conservation of natural resources.”
GRNB tries to reflect the performance of the S&P Green Bond Select Index, which is comprised of debt issued for qualified “green” purposes.