Fixed income ETFs are increasingly tapping into socially responsible investing themes. A good example of that trend is the iShares Global Green Bond ETF (NasdaqGM: BGRN), which debuted last November.
The iShares Global Green Bond ETF tries to reflect the performance of the Bloomberg Barclays MSCI Global Green Bond Select (USD Hedged) Index, which is comprised of global investment-grade green bonds issued to fund projects with direct environmental benefits, according to the fund’s prospectus.
Green bonds are fixed income debt securities where the proceeds are exclusively applied to projects or activities that promote climate or other environmental sustainability purposes.
“While people often associate ESG or sustainable investing with stock funds, a similar approach can be used for bond portfolios, too,” said BlackRock in a recent note. “As with stocks, bond issuers can be rated on distinct ESG characteristics and in turn, the bonds from these issuers. Indeed, ESG analysis has become increasingly important in credit ratings themselves. As demand has grown, credit ratings agencies have been exploring ways to incorporate ESG analysis in their ratings, and some have already started doing so.”
BGRN ETF Details
BGRN holds 192 green bonds with an effective duration of 6.92 yeas and a weighted average maturity of 7.92 years. French, German and U.S. green bonds combine for about 41% of the fund’s geographic weight. Due to the fact that governments are often major issuers of green bonds, BGRN’s credit quality is high. About 80% of the fund’s holdings are rated AAA, AA or A.
“Green bonds are an even more targeted approach to investing sustainably and are often known as ‘impact’ investments, since proceeds proactively and directly fund sustainable projects,” according to BlackRock. “These bonds–issued by foreign government agencies, supranational issuers or corporations–are used to fund new and existing projects that promote environmental purposes. Think solar panels or clean transportation.”
BGRN’s primary competitor in the green bond ETF space is the VanEck Vectors Green Bond ETF (NYSEArca: GRNB), the first fixed income exchange traded fund offering exposure to green bond.
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 supranational, government, and corporate issuers globally in multiple currencies,” according to VanEck.
This is a list of the largest Fixed Income Socially Responsible ETFs traded in the USA which are currently tagged by ETFdb.
|Symbol||ETF Name||Total Assets ($MM)||YTD||Avg Volume||Previous Closing Price||1-Day Change|
|AGG||iShares Core U.S. Aggregate Bond ETF||$59,604.54||2.41%||4,938,274||$108.25||0.18%|
|BND||Vanguard Total Bond Market ETF||$37,922.80||2.54%||2,533,467||$80.64||0.17%|
|BSV||Vanguard Short-Term Bond ETF||$22,414.00||1.58%||2,340,702||$79.35||0.13%|
|TIP||iShares TIPS Bond ETF||$20,751.02||3.01%||1,212,182||$112.81||0.23%|
|SHV||iShares Short Treasury Bond ETF||$20,097.92||0.75%||2,336,816||$110.49||0.00%|
|SHY||iShares 1-3 Year Treasury Bond ETF||$19,570.32||0.94%||3,346,586||$83.94||0.05%|
|BNDX||Vanguard Total International Bond ETF||$16,417.96||2.77%||2,135,843||$55.60||0.05%|
|IEF||iShares 7-10 Year Treasury Bond ETF||$13,269.08||1.73%||4,588,100||$105.36||0.18%|
|TLT||iShares 20+ Year Treasury Bond ETF||$12,610.06||1.54%||7,921,075||$122.57||0.21%|
|GOVT||iShares U.S. Treasury Bond ETF||$9,724.32||1.96%||3,765,110||$25.00||0.12%|
* Assets and Average Volume as of 2019-04-23 20:15 UTC