The VanEck Vectors Green Bond ETF (NYSEArca: GRNB) is one of the leaders in the field of fixed income ETFs adhering to environmental, social and governance (ESG) principles. For GRNB, that’s important positioning because more ESG bond issues could come to market in the years ahead as a result of the coronavirus pandemic.
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 the supranational, government, and corporate issuers globally in multiple currencies,” according to VanEck.
“Issuance of bonds for social and green projects will accelerate as investors focus more on sustainability and the environment in the age of Covid-19, according to Goldman Sachs Group Inc,” reports David Caleb Matua for Bloomberg.
Right Time for GRNB
With the universe of ETFs following environmental, social and governance (ESG) poised to expand, investors should also expect to see more fixed income funds dedicated to virtuous investing.
Investors, including institutions, are clamoring for green bonds, a surefire sign that the space is growing and could continue to do so as more investors demand green initiatives in their investments. Private industries are also joining the fray, offering their own green bond issues that address investors’ needs for environmentally friendly initiatives.
“U.S. companies see an opportunity to align fundraising with broad sustainability strategies by issuing debt for environmental, social, and governance projects. At the same time, a broadening pool of investors is looking to buy ESG-linked bonds, potentially leading to better pricing for a borrower,” according to Bloomberg.
Green bonds are debt securities issued to finance projects that promote climate change mitigation or an adaptation or other environmental sustainability purposes. The new breed of green bonds gained momentum in the global market ever since the European Investment Bank issued the first green bond in 2007. True to that heritage, green bonds are perking up in Europe.
Environmental assessment categories can include a company’s impact on climate change, natural resource use, and waste management, and emission management. Social evaluation categories can include a company’s relations with employees and suppliers, product safety, and sourcing practices. Governance assessment categories can include governance practices and business ethics.
“Borrowers globally have raised a record $76.97 billion in social and sustainability bonds this year, exceeding the $55.4 billion raised in the whole of last year, according to data compiled by Bloomberg. Moody’s Investors Service predicts global issuance of social and sustainability bonds will hit $150 this year,” reports Bloomberg.
For more on multi-asset strategies, please visit our Multi-Asset Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.