While environmental, social and governance (ESG) investing has caught fire in equities, bonds could present ETF investors with the next big thing. They can start looking at ESG-focused debt via funds like the SPDR Bloomberg SASB Corporate Bond ESG Select ETF (RBND).
RBND seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Bloomberg SASB ®US Corporate ESG Ex-Controversies Select Index that tracks investment grade corporate bonds issued by companies that exhibit certain ESG characteristics. Normally, the fund generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index or in securities that the Adviser determines have economic characteristics that are substantially identical to the economic characteristics of the securities that comprise the index.
RBND ETF highlights:
- Seeks to track an index that is designed to exclude securities involved in and/or which derive significant revenue from certain controversial business practices, industries or product lines and utilizes ESG scores to help weight the bonds, while also minimizing active total risk versus the Bloomberg Barclays US Corporate Index
- May be used as an ESG core building block given that it seeks to track an index that is designed to exclude controversies and maximize the R-Factor™ ESG score upon which the benchmark index relies, which is based on the Sustainability Accounting Standards Board (“SASB”) materiality framework, while also controlling for risk parameters
While ESG bonds have already piqued investor interest in other parts of the globe like Europe, it’s still a nascent corner of the bond market in the U.S. RBND puts its own spin on ESG bonds, as mentioned in the fund description, by using its own qualifying criteria to create its own benchmarks.
“The goal of the fund is to help create a diversified, investment-grade corporate fixed-income ESG exposure while looking to match the risk and return characteristics of the parent non-ESG corporate fixed-income benchmark,” said Noel Archard, CFA, Global Head of SPDR Product at State Street SPDR ETFs. “RBND represents a best-in-class ESG approach that can be used as an alternative for traditional core fixed-income exposures.”
Versatile and Cost-Effective
Furthermore, investors get exposure to this unique strategy for ESG-focused bonds at an expense ratio of just 0.12%. Even if an investor’s prime focus isn’t ESG, RBND can still serve as a portfolio diversifier for investors who want general bond exposure.
“Given all of this, RBND might be considered for use with both ESG and non-ESG fixed-income allocations,” said Archard.
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