EEnvironmental, social and governance (ESG) investing has been a force to be reckoned with in capital markets in recent years, and it will continue to be, especially with its growing presence in bond markets.
Numerically, this could translate into record bond issuance by 2025. According to a study by Pictet AM and the Institute for International Finance (IIF), issuance could reach 4.5 trillion dollars. dollars, more than three times the emission in 2021.
“By 2025, there will be few global investors who don’t have a meaningful allocation to ESG and green investing. meet their net zero commitments, we will have effectively greened global bond markets, transforming our environment for the better,” said Sonja Gibbs, Managing Director and Head of Sustainable Finance at the IIF.
A corporate bond option mixed with ESG
Investors looking to add a dose of ESG with the return potential of corporate bonds can look to the Vanguard ESG US Corporate Bond ETF (VCEB). In accordance with its fund description, VCEB seeks to track the performance of the Bloomberg MSCI US Corporate SRI Select Index, which excludes bonds with a maturity of one year or less and less than $750 million outstanding. and is reviewed for certain ESG criteria by the index provider, which is independent of Vanguard.
- Provides debt issues filtered according to certain ESG criteria.
- Specifically excludes bonds of companies which the index sponsor determines are involved in and/or derive threshold amounts of income from certain activities or business segments related to adult entertainment, alcohol, gambling money, tobacco, nuclear weapons, controversial weapons, conventional weapons, civilian firearms, nuclear energy, genetically modified organisms or thermal coal, oil or gas.
- Excludes corporate bonds that, as determined by the index sponsor, do not meet certain standards defined by the index sponsor’s ESG Controversy Assessment Framework, as well as companies that have not at least least one woman on their board.
- Has a low expense ratio of 0.12% and a 30-day SEC yield of 2.69%
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