BlackRock has expanded its sustainable investment offering with the launch of the iShares Global Green Bond ETF (BGRN US) on Nasdaq Exchange.
Carolyn Weinberg, iShares Global Head of Product at BlackRock.
The fund provides exposure to hundreds of investment grade green bonds – bonds that have been issued to finance projects with a positive environmental impact – from issuers globally.
The green bond market has experienced explosive growth over the past decade with more than $500 billion in green bonds having been issued globally.
The fund tracks the Bloomberg Barclays MSCI Global Green Bond (USD Hedged) Index which consists of bonds from governments, supra-nationals, and corporations from both developed and emerging markets. Bonds may be issued in any currency with the index hedging any foreign currency exposure back to the US dollar.
Eligible securities do not necessarily need to be formally labelled as ‘green bonds’ but must pass an evaluation by MSCI ESG Research that is based on four criteria in accordance MSCI’s Green Bond Principles. These criteria focus on the actual use of proceeds (within eligible environmental causes) as well as the existence of processes which ensure the correct allocation, management, and reporting related to the use of proceeds.
Convertibles, preferred securities, inflation-linked debt, most municipal bonds, and floating-rate securities are all not eligible for inclusion.
“This fund simplifies access to green bonds, enabling investors to more precisely match their values to their investment portfolios,” said Carolyn Weinberg, iShares Global Head of Product at BlackRock. “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,” added Weinberg.
With an expense ratio of 0.20%, the fund is 10 basis points cheaper than the VanEck Vectors Green Bond ETF (GRNB US), which debuted in March 2017 and was the first US-listed green bond ETF. GRNB tracks the S&P Green Bond Select Index and has accumulated approximately $25 million in AUM.
The future growth of ESG
BlackRock believes that demand for sustainable investing will grow dramatically into the next decade as investors, specifically US wealth investors and institutions, embrace sustainable ETFs as tools to align their investments with their values and long-term financial objectives.
The firm predicts ESG-related ETF assets are expected to grow from $25 billion today to more than $400bn by 2028, increasing the ETF share of total ESG fund assets from 3% to 21%.
Positioning itself to help facilitate this growth, last month the firm introduced its “Sustainable Core” range of ETFs, designed to offer low cost building blocks for investors to build broad, diversified sustainable portfolios.
In addition to sustainable ETFs, iShares has also introduced portfolio analysis tools, models and transparent data to improve the sustainable investment experience.