Today is World Environmental Day, an opportune time to discuss and evaluate environmentally friendly investments, including the VanEck Vectors Green Bond ETF (NYSEArca: GRNB).
GRNB tracks the S&P Green Bond Select Index, which is “comprised of labeled green bonds that are issued to finance environmentally friendly projects, and includes bonds issued by the supranational, government, and corporate issuers globally in multiple currencies,” according to VanEck.
The green bond investment area is still growing and it’s timely corner of the bond market as more asset allocators are pondering how they can incorporate sustainable solutions into portfolios.
“It is now more holistic than ever, encompassing environmental matters of course, but also extending further to address issues of other causalities, for example, public health,” notes Maria Dikeos, Head of Global Loans Contributions, Refinitiv. “How does our behavior and decisions impact not only the environment but the social and economic wellbeing of all individuals? In turn, how do lending and funding decisions play a role in this? It is not a matter of individual corporate winners and losers, but of the global community at large. Increasingly, arrangers, investors, and borrowers alike are asking more of those questions. The bar is being raised in terms of answers and execution.”
Be Green, Print Green?
Green bonds are debt securities issued to finance projects that promote climate change mitigation or an adaptation or other environmental sustainability purposes. The new breed of green bonds gained momentum in the global market ever since the European Investment Bank issued the first green bond in 2007.
Investors asked and now they are receiving—it seemed the demand for environmental, social and governance (ESG) fixed income was only getting stronger as the space began to gain steam, and now, green bonds are beginning to sprout everywhere.
“Although the pandemic has caused a slowdown in global Green and ESG lending volumes and the economy in general, it has spurred increasingly important industry discussions and focus on creative and accountable lending practices holding lenders and borrowers to a higher standard,” said Dikeos.
Investors, including institutions, are clamoring for green bonds, a surefire sign that the space is growing and could continue to do so as more investors demand green initiatives in their investments. Private industries are also joining the fray, offering their own green bond issues that address investors’ needs for environmentally friendly initiatives.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.