On Tuesday, NYSE spoke with Noel Archard, CFA, Global Head of SPDR Product at State Street SPDR ETFs, about the SPDR Bloomberg SASB Corporate Bond ESG Select ETF (RBND), on “What’s the Fund.” This will be SSGA’s first fixed income ESG ETF.
With continued use of ESG investments by investors, who are attempting to mitigate risks, deliver long-term, sustainable returns, or express values for preferences through their portfolio choices, there have been frequent requests from SSGA’s clients concerning more choices in the fixed income ESG space, much like how the early products focused on equity themes.
“This core fixed-income building block will help finance and incorporate ESG into their bond portfolios,” Archard explains.
He continues, “The goal of the fund is to help create a diversified, investment-grade corporate fixed-income ESG exposure while looking to match the risk and return characteristics of the parent non-ESG corporate fixed-income benchmark. RBND represents a best-in-class ESG approach that can be used as an alternative for traditional core fixed-income exposures.”
The starting index is the Bloomberg Barclays U.S. Corporate Index. From that universe, issues involved in or derive significant revenue from six controversial categories are removed, as well as securities that don’t have an ESG score.
The remaining securities are weighted to maximize their ESG score within the SASB materiality framework while still looking to minimize that benchmark’s active total risks. To clarify, SASB (the sustainable accounting status boards) is an independent, non-profit organization that helps public corporations disclose financially immaterial information to investors.
“This concept of materiality sheds light on which ESG metrics might be more relevant to a company, depending on the line of business it’s in,” Archard notes. “Given all of this, RBND might be considered for use with both ESG and non-ESG fixed-income allocations.”
Above all, SSGA remains focused on total costs and long-term ownership. With that in mind, the expense ratio of RBND is 12 bases points.
To learn more about this fund and SSGA’s ESG overview, visit their website.
This article originally appeared on ETFTrends.com.