Green bonds — issued by companies and governments to finance environmentally friendly projects — are one of the fastest-growing parts of the fixed income universe. Investors can access the theme with the VanEck Vectors Green Bond ETF GRNB, which is a few weeks shy of its first birthday.
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 supranational, government and corporate issuers globally in multiple currencies,” according to VanEck.
Data confirm green bond issuance is surging, a scenario that could increase awareness of not only these bonds, but GRNB as well. In just over 11 months on the market, GRNB has nearly $15 million in assets under management.
Important Data Points
“Green bond issuance in 2017 shattered the record from 2016, with both new and repeat issuers helping to satisfy the increasing demand for sustainable bond investments,” VanEck said in a recent research piece. “Approximately $155 billion was issued by 242 issuers, including 156 first-time green bond issuers. Total issuance was 84-percent higher than in 2016, an illustration of the spectacular growth that the market continues to experience.”
For its part, GRNB holds 102 bonds. The ETF's roster is mix of green sovereign debt and green bonds courtesy of corporate issuers. For example, one of GRNB's largest holdings from a U.S. corporate issuer is a green bond issue from Apple Inc. AAPL maturing in 2023. Rated AA+, the Apple green bond is just over 1 percent of GRNB's weight.
GRNB's top 10 holdings combine for just under one-quarter of the fund's weight. The largest issue, a French sovereign bond, commands 7 percent of the ETF's roster.
A Global Approach
“France was the second-largest issuer in 2017 with its benchmark sovereign green bond issuance,” said VanEck. “Although not the first ever sovereign green bond, it was by far the largest with over $10 billion issued in total, and helped pave the way for Fiji and Nigeria to come to market with sovereign green bonds later in the year.”
GRNB reflects the global nature of the green bond market, as U.S. issues account for just 8.8 percent of the fund's roster. Over 54 percent of GRNB's holdings are denominated in euros and almost 35 percent are dollar-denominated bonds.
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