Companies are setting carbon reduction goals at a pace not seen before. The number of firms that have set net zero pledges doubled in 2020, while 128 signatories of the Net-Zero Asset Managers initiative, representing $43 trillion in assets, have committed to supporting companies’ net-zero ambitions.
And this is important to investors. According to Bloomberg, companies setting more ambitious carbon reduction goals see an ESG fund inclusion rate of 24%, while the rate for firms that lag on carbon reduction ambition is notably lower (15%).
With companies setting more ambitious carbon reduction goals, bond investors may want to check out the Vanguard ESG U.S. Corporate Bond ETF (VCEB). VCEB seeks to track the performance of the Bloomberg MSCI U.S. Corporate SRI Select Index, which includes U.S. dollar-denominated, investment-grade, fixed-rate, taxable bonds with greater than one year maturity.
To be included in the index, securities are screened for certain environmental, social, and governance (ESG) criteria. VCEB specifically excludes bonds of companies that engage in adult entertainment, alcohol, gambling, tobacco, nuclear weapons, controversial weapons, conventional weapons, civilian firearms, nuclear power, and thermal coal, oil, or gas.
Additionally, the index also excludes bonds of companies that do not meet certain standards defined by the index sponsor with respect to an ESG controversies assessment, as well as companies that do not meet certain diversity criteria.
VCEB carries an expense ratio of 0.12%.
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