Green bond issuance continues to rise in popularity, and American automaker Ford is ready to jump on the trend in order to finance its move towards offering more electric vehicles (EVs).
“The Dearborn-based company is marketing ‘green bonds’ expected to mature in 10 years, according to a person with knowledge of the matter,” a Detroit News article says. “Early pricing discussions anticipate a yield in the 3.625% area and net proceeds will be used exclusively for clean transportation projects and for the design, development and manufacturing of its battery electric-vehicle portfolio, the person said.”
Environmental, social, and governance (ESG) investing is continuing to gain steam with more green bond issuance. Ford is hoping that it can help the company return to investment-grade status with its bonds.
“Ford said last week that it plans to cut its borrowing costs by more than half as it repurchases $5 billion in junk-rated debt and seeks to set a path to return to an investment-grade credit rating,” the article says further. “At the time, the company said it expects to raise at least $1 billion in this new green bond offering, a move that’s part of a new sustainable financing strategy based on environmental and social goals.”
Getting Corporate Bond Exposure
As the trend towards more green bonds by corporate America continues to push higher, bond investors can get in on the action with the Vanguard ESG U.S. Corporate Bond ETF (VCEB). Fixed income investors can combine corporate bond yield and ESG principles with VCEB.
Per its fund description, VCEB seeks to track the performance of the Bloomberg MSCI US Corporate SRI Select Index. The index excludes bonds with maturities of one year or less and with less than $750 million outstanding, and is screened for certain ESG criteria by the index provider, which is independent of Vanguard.
VCEB highlights:
- Provides debt issues screened for certain ESG criteria.
- Specifically excludes bonds of companies that the index sponsor determines are involved in and/or derive threshold amounts of revenue from certain activities or business segments related to: adult entertainment, alcohol, gambling, tobacco, nuclear weapons, controversial weapons, conventional weapons, civilian firearms, nuclear power, genetically modified organisms, or thermal coal, oil, or gas.
- Excludes bonds of companies that, as determined by the index sponsor, do not meet certain standards defined by the index sponsor’s ESG controversies assessment framework, as well as firms that fail to have at least one woman on their boards.
For more news, information, and strategy, visit the Fixed Income Channel.