Despite President Donald Trump’s stance on the recent Paris Agreement on Climate Change, the long-term outlook for green or socially responsible exchange traded funds remain intact.
For instance, the VanEck Vectors Green Bond ETF (NYSEArca: GRNB), the only bond dedicated to the socially responsible investment theme, is still up 2.2% over the past month, outperforming the Bloomberg Barclays U.S. Aggregate Bond Index’s 1.0% gain.
“Regardless of the future of the Paris Agreement, the green bonds market continues to have significant growth potential,” William Sokol, Product Manager of ETFs at VanEck, said in a note.
Green funds remain a popular play, especially over the past decade as rising concerns over climate change helped fuel the investment theme. The investments typically draw younger and more environmentally minded investors who see profits in the nascent green industry.
Even though Trump has made his stance clear on Obama-era climate initiatives, many don’t think the new administration has the ability to enact any of the promised reversals that the president has stated.
“Most investors are starting to realize that the federal government is limited in its impact and the risk to (green energy subsidies) is relatively low,” Mike Garland, Chief Executive of wind farm owner Pattern Energy Group Inc, told Reuters.
Moreover, the U.S. is only a small part of the global push toward green or socially responsible investments. Even without the U.S., many other countries have already adopted policies in favor of renewables, and a global green bond position could play a role in financing the continued transition.
“The U.S. has thus far had a relatively small presence in the global green bonds market,” Sokol said. “Europe, and more recently China and other emerging markets, have played a much greater role in the development of the market in terms of formulating policies that support market growth. Even though the U.S. has ceded its position on the issue of climate change, other countries will likely continue to make progress on renewables, electric vehicles, etc., providing a strong project pipeline for green bonds.”
Taking the initiative, Corporate America has already pushed into green investments with little support from the federal government. For instance, corporate issuers like Apple (NasdaqGS: AAPL) have issued green bonds both to tout their environmental stewardship and in response to investment demand, Sokol said.
For more information on green investments, visit our socially responsible ETFs category.