The universe of fixed income exchange traded funds following socially responsible investing principles gained another member Thursday when BlackRock Inc. BLK launched an ETF dedicated to green bonds.
The iShares Global Green Bond ETF BGRN is the latest bond ETF to tap into environmental, social and governance (ESG) principles.
What Happened
Fixed income ETFs tilting toward sustainable investment themes are not new territory for BlackRock's iShares, the world's largest ETF issuer. Prior to the debut of BGRN, iShares had three fixed income ETF focusing on various sustainable investing themes.
Last month, iShares launched the iShares ESG U.S. Aggregate Bond ETF EAGG, the ESG answer to the popular iShares Core Bond ETF AGG. In less than a month on the market, EAGG already has over $55 million in assets under management.
Why It's Important
The new BGRN tracks the Bloomberg Barclays MSCI Green Bond Select (USD Hedged) Index and holds nearly 180 green bonds. Green bonds can be issued by corporations, governments and super-national issues. Bonds in this category are deemed to have positive environmental impacts and are used to fund environmentally friendly projects.
“This fund simplifies access to green bonds, enabling investors to more precisely match their values to their investment portfolios,” Carolyn Weinberg, iShares Global Head of Product at BlackRock, said in a statement. “Issuers of green bonds disclose how their projects are achieving the promised environmental outcome, which will allow us to provide our clients with fund level impact reporting. BGRN can be positioned in the core of a global bond allocation or as a satellite in a diversified fixed income portfolio to achieve greater environmental impact.”
BGRN has an effective duration of 6.96 years and an average yield to maturity of 3.65 percent. The new green bond fund is heavily investment-grade as about 78 percent of its holdings are rated AAA, AA or A.
What's Next
BGRN isn't the first green bond ETF on the market. Rather, the new iShares fund will compete directly with the VanEck Vectors Green Bond ETF GRNB, which debuted in March 2017.
BGRN charges 0.20 percent per year, or $20 on a $10,000 investment compared with GRNB's annual fee of 0.30 percent.
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