Horizons ETFs Management (Canada) Inc (Horizons ETFs) has launched the Horizons S&P Green Bond Index ETF (HGGB).
Shares of the ETF will begin trading today on the Toronto Stock Exchange (TSX) under the ticker symbol HGGB. HGGB is Canada’s first ETF focused exclusively on providing exposure to a portfolio of global green bonds – a type of fixed-income instrument that raises capital for projects with specific environmental objectives or benefits.
Green bonds carry the same credit rating as their issuers other debt obligations. The green bond market is growing: according to the Climate Bonds Initiative, global green bond and loan issuances reached a new record of USD270 billion in 2020. Since market inception in 2007, there have been over USD1 trillion in cumulative green bond issuances, with European and American institutions among the largest issuers.
HGGB seeks to replicate, to the extent possible, the performance of the S&P Green Bond US Dollar Select Index, net of expenses. The Index seeks to measure the performance of global green-labelled bonds issued in US dollars that are subject to stringent eligibility criteria to fund projects that have positive environmental or climate benefits. The ETF seeks to hedge the US dollar value of its portfolio to the Canadian dollar at all times.
“More than ever before, governments, supranational institutions and corporations across the world are looking to fund important environmentally friendly initiatives that allow them to both improve their eco-footprint as well as ensure their operations will be in-line with the expanding rigors of environmental regulation,” says Steve Hawkins, CEO of Horizons ETFs. “HGGB’s global mandate offers access to income from those eco-conscious organizations helping to lead the charge towards a greener future.”
HGGB will allow Canadian fixed income investors to deploy their capital to the largest global issuers of green bonds. These bonds provide many of the traditional benefits of fixed income investing, including generating income and providing important portfolio diversification. In the case of green bonds, there is the added benefit of ensuring that the capital that investors lend indirectly by buying the ETF is used to fund important environmental initiatives around the world.
“Organisations that fail to adapt to the impacts of climate change may face greater business challenges and could ultimately represent a greater risk within a portfolio because of it,” says Hawkins. “Conversely, those that proactively prepare are more likely to be better situated to ‘weather the storm’, protecting their operations and helping to preserve the environment for years to come. These organizations offer arguably more ethical and potentially more sustainable sources of portfolio income for investors. HGGB gives Canadian investors the ability to potentially improve the climate risk metrics of their global fixed income exposure, while also feeling good about doing so, knowing they are directing their investment dollars toward a greener future.”