Great year for the issuance of sustainable bonds
Sustainable investing is making its way into the fixed income landscape in significant ways, which could be positive for exchange traded funds such as the VanEck Vectors Green Bond AND F (GRNB).
GRNB is the original AND F dedicated to green bonds, one of the largest and fastest growing segments of the sustainable bond space. Green bonds are resonating with fixed income investors, in part because the concept is easy to explain. Businesses and governments are issuing green debt to finance environmentally friendly projects, and this market is growing at an exponential rate.
In the third quarter, green, social, sustainable and sustainability bond issuance jumped to $ 217 billion, a 25% year-over-year increase. Green bonds accounted for more than half of that total.
“Out of the four segments, there were $ 115 billion in green bonds, $ 29 billion in social bonds, $ 52 billion in sustainability bonds and $ 21 billion in sustainability bonds. Volumes on the four labels totaled $ 775 billion in the first nine months of 2021, nearly double the $ 402 billion issued in the first three quarters of 2020, ”according to Moody’s Investors Service.
The $ 100 million GRNB, which will celebrate its fifth anniversary next March, tracks the S&P Green Bond US Dollar Select index. This benchmark is made up of green debt denominated in dollars from private, government and supranational issuers.
Obviously, bonds are long-term assets for most investors, which adds to the attractiveness of GRNB because the green and social bond movement is still in its infancy, and green bonds are leading this momentum.
“Full year issue of GSSS bonds are expected to exceed $ 1 billion in collective annual issuance by 2021. Across the various segments, we expect volumes to eclipse $ 500 billion in green bonds, $ 200 billion each in social and sustainability bonds and $ 100 billion in sustainability bonds, ”adds Moody’s.
This is an annual record and it indicates that investors want green and sustainable strategies in the bond market. GRNB can be a force here because it’s 2.02% over 30 days SECOND the yield is decent by current standards, it offers global diversification (around 20 countries are represented in the fund) and its credit profile is solid, with almost 70% of its 294 holdings rated investment grade.
GRNB also offers some sectoral diversification, which is relevant because more companies beyond financial institutions (40.1% of GRNB) are getting into the green bond game.
“Financial institutions also contributed significantly to global green bond volumes in the third quarter with $ 24 billion in issuance representing 21% of the quarterly total. During the first nine months of the year, non-financial companies issued 170 billion dollars of green bonds, representing a preponderant share of 45% of the world total “, notes Moody’s. “The two largest non-financial business deals in the third quarter included a $ 2 billion deal from Mondelez International, Inc. and a $ 2 billion deal from Walmart, both in September.”
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