The advent of ESG and SRI investing has prompted the launch of beta exposure green bond ETFs. At this writing there are two global green bond ETFs. Still relatively nascent, their combined assets total over $50 million. Both ETFs are passively managed to an index and both index methodologies use similar approaches for bond selection.
The Rieger Report ranks them as follows:
iShares Global Green Bond ETF (BRGN): Rationale: Due to the global nature of green bonds and the resulting non-USD issuance the currency risk mitigation taken by iShares is a value proposition as long as hedging is cost efficient. The lower management fee v. it’s competitor is also noted but solely due to the low yield of both ETFs.
VanEck Vectors Green Bond ETF (GRNB): Rationale: Yields about the same as it’s competitor but without the active currency hedging. According to it’s website, the USD exposure is less than 29% as of 12/31/2018.
It is noted that both ETFs have low yields relative to other fixed income asset classes (corporate bonds, municipal bonds et al) so the “doing well by doing good” is not yet paying off for global green bond investors, in my opinion.
January 2019 Green Bond ETF Rankings
Sources: iShares by BlackRock, VanEck. Table is shown for illustrative purposes only. Past performance is not indicative of future results. Data as of 1/11/2019.
2019 Analyst Disclosure
JR Rieger and or the Rieger Report LLC has not received compensation either directly or indirectly from the sponsor(s) of the ETF(s) included in this report.
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