Green Bond Market Experiences Surge in Activity | ETF Trends

In another sign that companies and governments around the world are putting their money where their proverbial mouths are when it comes to net-zero and renewable energy goals, the first quarter marked a surge in green bond issuance.

That could stoke fresh interest in the VanEck Green Bond ETF (GRNB) – the original exchange traded fund dedicated to green debt. GRNB is higher by nearly 2% year-to-date and that could be a sign enthusiasm is returning to this corner of the bond market.

GRNB’s 2023 performance is positive for another reason, as the ETF is proving durable amid a spate of new issuance.

Global issuance of new green bonds, the largest category of sustainable debt by amount, reached $163.9 billion in the first quarter, breaking a previous record of $143.1 billion set in the last three months of 2021, according to data compiled by Bloomberg. Sales of the bonds are up 32% year-on-year, the data shows,” reported David Caleb Mutua for the news agency.

GRNB follows the S&P Green Bond U.S. Dollar Select Index and holds 322 dollar-denominated issues. It remains to be seen if the ETF’s roster size increases when the underlying index rebalances as 2023 unfolds, but this much is clear: Green bond issuance is on the rise and is on pace to topple the annual issuance record set two years ago.

“This year, global green bond sales could reach about $600 billion, which would exceed 2021’s record levels, according to BNP Paribas SA, the biggest underwriter according to current Bloomberg rankings. With borrowers prioritizing the transition to cleaner business and investors returning to the market, issuance could go even higher, Trevor Allen, head of sustainability research at BNP, wrote in a note in February,” according to Bloomberg.

Data indicate green bonds remain popular in Europe, and GRNB provides exposure to that trend. Ten of the countries represented in GRNB are European nations, including a combined weight of about 13% to green bonds issued by the U.K., France and Germany.

As its name implies, GRNB is dedicated to green bonds, but renewed interest in the ETF and the asset class signals that demand for sustainable bonds is in place and growing.

“Global sales of all kinds of ESG bonds, including green, social, sustainability and sustainability-linked debt rose 13.9% to $282.5 billion in the first quarter,” concluded Bloomberg.

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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.