Green bonds, a growing corner of the fixed income universe, are growing in popularity and that could be a boon for the VanEck Vectors Green Bond ETF (NYSEArca: GRNB).
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.
GRNB features a mix of corporate and sovereign debt and plenty of ex-US diversification, all of which are points to consider in the current environment.
“Debates in the U.S. over climate change may grab more headlines, but Earth’s future rests largely with developing countries, as China, India, and other burgeoning economies follow a green or brown paradigm,” reports Craig Mellow for Barron’s. “Fixed-income investors can influence the outcome, maybe, through the fast-growing market in emerging-market green bonds.”
Going Green Matters
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.
GRNB is levered to theme of increased green bond issuance in developing economies as the fund features exposure to bonds issued by six emerging markets, including a 15.22% weight to China.
“The emerging-market green bond movement is encouragingly driven by private borrowers looking to concrete investments in sustainable energy, cleaner water, more efficient transportation, or smarter building,” according to Barron’s.
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.
“The emerging-market green bond phenomenon isn’t too young to have spawned doctrinal differences. Yerlan Syzdykov, head of global emerging markets at Amundi, focuses on credit issued by banks, which lend to an array of smaller green companies,” reports Barron’s.
GRNB is up nearly 4% this year and yields 2.11%.
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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.