Today BlackRock followed up its October launch of the iShares ESG U.S. Aggregate Bond ETF (EAGG) with the rollout of it first green bond ETF. The iShares Global Green Bond ETF (BGRN) targets fixed-income securities specifically linked to projects designed to alleviate climate change or support environmental sustainability goals.
“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.”
BGRN sets a new precedent for green bond ETFs. It’s the lowest-cost green bond ETF option in the U.S. at 25 bps, with a 5 bps waiver. And it also seeks to track a US dollar-hedged underlying index, the Bloomberg Barclays MSCI Global Green Bond (USD Hedged) Index. The index hedges any foreign currency exposure back to the US dollar. For inclusion in the index, securities are independently evaluated by MSCI ESG Research based on four criteria in the Green Bond Principles published by MSCI.
BGRN comes with an expense ratio of 0.20% after the application of a waiver and lists on the Nasdaq stock exchange.
The underlying index methodology requires components be evaluated by MSCI ESG Research to ensure they meet the firm’s four green bond principles that focus on the use of the proceeds and on reporting standards. The prospectus notes that eligible bonds do not need to be labeled as green bonds as long as they meet the MSCI criteria and provide an appropriate level of transparency regarding the use of their proceeds.
“The green bond market allows investors to direct funding toward environmentally beneficial projects while maintaining their fixed income asset allocation,” said Ashley Schulten, Head of Responsible Investing for Global Fixed Income at BlackRock. “This should help broaden support for the green bond market and thus, the needed projects it is funding.”
The index can include sovereign debt, government-related debt, and corporate and securitized bonds denominated in the currencies of developed and emerging market issuers. As of the end of September, the index covered 28 countries, including the U.S., the document says.
It notes that certain types of fixed income are excluded from the index, including convertibles and preferred securities, as well as similar securities; inflation-linked debt; most municipal bonds; and floating-rate securities, among other types of debt. The index also includes a currency hedging element to minimize currency fluctuations.
Source Market Watch