Retirees Shouldn't Forget About Getting ESG Exposure

While environmental, social and governance (ESG) investing is still a relatively new concept, retirees can still benefit from ESG exposure by investing in the issues they care about while still allowing their money to work for them.

“Older people may feel a greater urgency because it’s their legacy,” says Fran Teplitz, executive co-director of business, investing, and policy at Green America, in a Kiplinger article. “They aren’t going to be in the workforce working to correct what needs to be fixed in society much longer, but their assets can continue working for a better world.”

Of course, retirees don’t want to put their money into investments that bear undue risk. Studies have shown, however, that ESG investments can provide substantial returns with a relatively low degree of risk.

“We now have hundreds of studies that show integrating ESG criteria into the investment process can match and sometimes exceed the financial performance of their conventional counterparts,” Teplitz says.

An ESG Corporate Bond ETF Option

As the trend towards more green bonds by corporate America continues to push higher, retirees, under the auspices of an advisor’s advice, may want to 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.

VCEB Distribution Yield Chart

VCEB Distribution Yield data by YCharts

For more news, information, and strategy, visit the Fixed Income Channel.