For all the talk about ESG and sustainable investing falling out of favor with some market participants, there’s ample evidence to the contrary. Some of that evidence comes courtesy of the global bond market.
Specifically, issuance of green bonds surged in the first half of 2024. That could put more eyeballs on the VanEck Green Bond ETF (GRNB ). That is the original exchange traded fund dedicated to this corner of the bond market. To its credit, GRNB is sporting a modest YTD gain. That’s more than can be said for some popular aggregate global bond funds.
As noted by Jonathan Gardiner, sustainable indices product manager at Bloomberg, green bonds reached $356 billion in the first half of the year. That’s after total annual sales set a new record in 2023. Increased issuance of green debt in January through June was facilitated by both corporate and sovereign issuers. GRNB is reflective of that proposition as it holds both corporate and government bonds.
Green Space for Green Bond Growth
Put simply, green bonds are debt issued to finance environmentally friendly and sustainable projects. It’s a relatively small and young corner of the global bond market. But GRNB has been around for more than seven years.
Regarding GRNB and the broader green bond space, age isn’t material, but embrace of these bonds is. At that sovereign level, that was in display in the first half, with governments selling $140 billion worth of green debt, according to Bloomberg. Japan and Italy combined for more than $22 billion of that figure. Japan accounts for 3.83% of GRNB’s geographic exposure.
Sovereign issuance represented 18% of green bond sales in the first quarter, with government issuers displaying significant commitment to green bonds.
“During Q1 2024, lifetime aligned sovereign GSS+ volume crossed the USD0.5tn mark, reaching USD538.3bn, and sustainable finance passed a milestone of 50 sovereign issuers, landing at 53. Of that total, 22 sovereign issuers contributed USD52.5bn in aligned volume in Q1 2024, 37% more than the USD38.4bn priced in the same period of 2023, and 24% over the USD42.4bn captured in Q4 2023,” according to the Climate Bonds Initiative.
Even when setting aside the “doing right” side of the green bond proposition, the asset class offers allure to income investors, namely in the form of elevated yields. For example, GRNB sports a 30-day SEC yield of 5.16%. On a stand-alone basis, that’s impressive. But it’s even more so when considering that 83% of the ETF’s holdings are rated investment-grade. Nearly half that group carries grades of AAA, AA, or A.
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