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VanEck launches green bond ETF


VanEck has launched the VanEck Vectors Green Bond ETF, describing it as the  first US-listed fixed income ETF to provide targeted exposure to the green bond category.

The firm writes that the GRNB comes to market as ‘green bonds’ appear poised for significant growth. “These bonds are debt instruments issued to finance projects or activities that promote climate change mitigation or adaptation, or for other environmental sustainability purposes. Issuance of green bonds has grown rapidly since the European Investment Bank issued the first green bond in 2007. According to the Climate Bonds Initiative, an investor-focused non-profit organisation that is working to promote large-scale investment in the low carbon economy, USD81 billion of green bonds were issued in 2016 and USD150 billion is expected to be issued in 2017.

"Until now investors have had limited options for efficiently accessing ‘green’ fixed income exposure," says Ed Lopez, Head of ETF Product Management and Marketing with VanEck. “We believe there's demand for green bonds from ESG-focused investors, but there may be appeal to traditional fixed income investors as well. Green bonds are simply conventional bonds with an environmentally friendly use of proceeds. So, global bond investors can make an allocation to green bonds without significantly altering the risk and return profile of their portfolio."

GRNB seeks to track the performance and yield characteristics of the S&P Green Bond Select Index. To be included in the Fund’s underlying index, a bond’s issuer must clearly disclose the rationale for the issuance, such as the use of proceeds, and the bond must be flagged as ‘green’ by the CBI. All bonds must be rated by at least one rating agency and additional filters are applied with respect to minimum par amount outstanding, maturity, and market of issue. The Index is weighted by market value, and includes a 10 per cent issuer cap, and a maximum allocation of 20 per cent to high yield.

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