BlackRock’s iShares expanded on its socially responsible exchange traded fund theme with the introduction of its first green bond strategy that cover fixed-income securities tied to projects designed to combat climate change or support a sustainable environment.
On Thursday, BlackRock rolled out the iShares Global Green Bond ETF (NasdaqGM: BGRN), which has a 0.20% expense ratio.
“This fund simplifies access to green bonds, enabling investors to more precisely match their values to their investment portfolios,” Carolyn Weinberg, iShares Global Head of Product at BlackRock, said in a note. “Issuers of green bonds disclose how their projects are achieving the promised environmental outcome, which will allow us to provide our clients with fund level impact reporting. BGRN can be positioned in the core of a global bond allocation or as a satellite in a diversified fixed income portfolio to achieve greater environmental impact.”
The iShares Global Green Bond ETF tries to reflect the performance of the Bloomberg Barclays MSCI Global Green Bond Select (USD Hedged) Index, which is comprised of global investment-grade green bonds issued to fund projects with direct environmental benefits, according to the fund’s prospectus.
Green bonds are fixed income debt securities where the proceeds are exclusively applied to projects or activities that promote climate or other environmental sustainability purposes.
The underlying index screens for four criteria specified in the Green Bond Principles published by MSCI ESG Research. First off, proceeds must fall within at least one of six eligible environmental categories defined by MSCI ESG Research, including alternative energy, energy efficiency, pollution prevention and control, sustainable water, green building, and climate adaption. The other three criteria include the existence of processes for green project evaluation and selection, the existence of processes for management of proceeds, and the existence of a commitment to ongoing reporting of the environmental impact.
“The green bond market allows investors to direct funding toward environmentally beneficial projects while maintaining their fixed income asset allocation,” Ashley Schulten, Head of Responsible Investing for Global Fixed Income at BlackRock, said in a note. “This should help broaden support for the green bond market and thus, the needed projects it is funding.”
For more information on new fund products, visit our new ETFs category.