With more investors looking to apply socially responsible and sustainable principles throughout portfolios, fixed income offerings are becoming a bigger part of that equation. The VanEck Vectors Green Bond ETF (NYSEArca: GRNB), the first fixed income exchange traded fund offering exposure to green bonds, is one fund that can help with that objective.
Green bonds are debt securities issued to finance projects that promote climate change mitigation or adaptation or other environmental sustainability purposes. The new breed of green bonds gained momentum in global market ever since the European Investment Bank issued the first green bond in 2007.
“For investors seeking to achieve both sustainability and financial objectives, green bonds have emerged as an important bridge to the UN Sustainable Development Goals (SDGs),” said VanEck in a recent note. “The SDGs represent a globally agreed upon framework that can help investors understand and measure how their portfolios are contributing to addressing critical global sustainability issues.”
Exploring Green Bonds
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.
The ETF debuted just over 18 months ago and holds 171 green bonds. GRNB has an effective duration of 6.50 years.
“Green bonds offer a link to the SDGs for investors seeking both sustainability and financial objectives,” said VanEck. “Their innovation is in their simplicity, given that they are structurally no different from traditional bonds. The additional disclosure and transparency of green bonds on the use of proceeds help connect investors with assets that are expected to deliver a positive sustainability impact.”
The green bond market is global, a trait reflected by GRNB, which provides exposure to about 20 countries and bonds denominated in more than seven currencies.
“The global framework provided by the SDGs allows investors to not only understand sustainability issues, but to also build more sustainable portfolios and identify the risks and opportunities that will emerge as the world grapples with the most challenging issues facing humanity. Green bonds will play a key part in addressing these challenges,” according to VanEck.
For more information on the fixed-income markets, visit our bond ETFs category.