The VanEck Vectors Green Bond ETF (GRNB) not only helps advisors and investors add some environmental stewardship to fixed income portfolios, but the original green bond ETF also adds international diversity, too.
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.
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. True to that heritage, green bonds are perking up in Europe.
Christine Lagarde, president of the European Central Bank (ECB), recently said the ECB will use its asset purchasing program to pursue green outcomes.
Going Green With GRNB
Investors asked and now they are receiving—it seemed the demand for environmental, social and governance (ESG) fixed income was only getting stronger as the space began to gain steam, and now, green bonds are beginning to sprout everywhere.
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 ECB news “marks the first time a major central bank has committed to using their bond purchasing to address climate issues. The involvement of the €2.8trn scheme will be a valuable addition to the growing number of investors, governments, regulators, and other institutions working to direct further capital towards climate finance,” according to FTSE Russell.
Data confirm the ECB isn’t afraid to provide support to green bonds and that’s an important catalyst for GRNB.
“ECB has already been purchasing green bonds as part of their previous programs, and at the end of 2019, they already owned 24% of eligible euro-area public sector green bonds and 20% of eligible euro-area corporate green bonds. Having such a large institutional buyer in the market for what is a relatively low yielding and low liquidity asset class has the potential to impact on the attractiveness of the market to third party investors, despite attracting new issuers,” according to FTSE Russel.