Japanese Developer Plans to Issue Innovative ESG Bond

The environmental, social and governance (ESG) investing space is growing so rapidly that creativity is a must in order to discern yourself from other ESG products. As such, one Japanese real estate developer is looking to offer a bond with a coupon that increases if it misses its mark with respect to environmental targets.

Hulic Co. plans to offer 10 billion yen ($94 million) of 10-year so-called sustainability-linked bonds in October, according to a filing Tuesday,” a Bloomberg article noted. “If the company isn’t able to meet either of its two green goals by 2025, the coupon on the debt will increase by 10 basis points.”

“One of its goals is to use the funds raised to develop mega solar systems so that all power use at buildings of its headquarters and subsidiaries is sourced from renewable energy,” the article added. “The other is to build a 12-story, fire-resistant commercial facility in Tokyo’s Ginza district made with wood grown in Japan.”

Even amid the Covid-19 pandemic, ESG has been an outperformer, which has been reflected in the popularity of the space.

“Global sales of sustainable bonds, in general, have jumped this year, rising 27% to $196 billion, reflecting growing investor demand for debt to pay for green and social projects,” the Bloomberg article said.


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Investors contemplating a high yield option can take a look at the Goldman Sachs Access High Yield Corporate Bond ETF (GHYB). GHYB seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Goldman Sachs High Yield Corporate Bond Index.

The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of high yield corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.

Investors who want ESG exposure via an ETF wrapper can take a look at the Xtrackers MSCI EAFE ESG Leaders Equity ETF (EASG). EASG seeks investment results that correspond generally to the performance of the MSCI EAFE ESG Leaders Index.

The fund will invest at least 80% of its total assets (but typically far more) in component securities (including depositary receipts in respect of such securities) of the underlying index. The underlying index is a capitalization-weighted index that provides exposure to companies with high ESG performance relative to their sector peers.

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