“Another attractive feature of green bonds relates to environmental impact,” said Sokol. “Green bonds are defined by what they finance, rather than the issuer, and investors can get data on specific projects funded by an individual bond. That helps investors quantify the impact their investment is making, with metrics such as carbon emissions reduced and water saved. There is certainly more progress to be made around measuring and reporting environmental impact, but most issuers are providing information. This transparency is another very powerful value proposition of green bond investing, especially for impact-oriented investors.”

GRNB has an effective duration of 6.43 years. Some market observers expect global green bond issuance will swell to a record $200 billion this year.

“A green bond strategy may provide investors exposure to issuers who are proactively addressing climate risk. And because you don’t currently give up yield, you can think of green bonds as a cheap or free hedge against climate risk in a portfolio,” according to Sokol.

For more information on the fixed-income markets, visit our bond ETFs category.

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