The ETF Gives Investors Easy Access to Hundreds of Purpose-Driven Green Bonds
NEW YORK: iShares extends its commitment to investor progress with the introduction of iShares Global Green Bond ETF (BGRN) to help investors pursue a measurable environmental impact from their investments. BGRN offers exposure to hundreds of investment grade green bonds whose proceeds are applied toward projects with environmental benefits.
“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.”
Green bonds are issued to fund projects or activities that have a positive impact on the environment. Supranational organizations, banks, corporations and governments have increasingly recognized green bonds as an essential tool to finance climate-related and other environmental projects. To date, more than $500 billion in green bonds have been issued globally1.
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 waiver2. 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:
1. The use of proceeds fall in eligible environmental categories such as:
- alternative energy
- energy efficiency
- pollution prevention and control
- sustainable water
- green building
- climate adaption
2. The existence of processes for green project evaluation and selection
3. The existence of processes for management of proceeds
4. The existence of a commitment to ongoing reporting
“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.”
BlackRock is an industry leader and Executive Committee member of the Green Bond Principles that promote green bond market guidelines to support issuers in transitioning their business model towards greater environmental sustainability through specific projects. BlackRock is also a member of the Climate Bonds Initiative, an international, investor-focused not-for-profit focused on mobilizing the $100 trillion bond market for climate change solutions. The firm owns and manages more than $8 billion in green bonds allocated to different portfolios.
The Growth of Sustainable Investing
BGRN builds off iShares Sustainable Core ETFs as the latest effort from BlackRock to bring sustainable investing mainstream. Last month, iShares 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.
Demand for sustainable investing is expected to grow dramatically into the next decade as investors, specifically U.S. wealth investors and institutions, embrace sustainable ETFs as tools to align their investments with their values and long-term financial objectives.
According to BlackRock projections, sustainable ETF fund assets are expected to grow from $25 billion today to more than $400 billion by 2028. The rapid growth in sustainable ETFs could increase the ETF share of total sustainable assets (ETFs and Mutual Funds) from 3% today to 21% by 2028.
Bond ETFs Go Mainstream
iShares revolutionized the bond market with the launch of the first fixed income ETFs fifteen years ago, providing investors with liquid and transparent exposures to the bond market.
Today’s green bond ETF is an extension of iShares innovation more than a decade ago, intended to provide clients with even more access to key markets where demand is growing.
Investor demand and comfort with using bond ETFs is further evidenced by record setting trading volume in October. Trading volumes reached $245bn of aggregate volumes, or $11.2 billion per day across all ETF providers. iShares bond ETFs represented 66% of total trading volumes for the month of October, averaging $7.8 billion per day. US iShares bond ETF trading volumes are up 29% YoY3.
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iShares unlocks opportunity across markets to meet the evolving needs of investors. With more than twenty years of experience, a global line-up of 800+ exchange traded funds (ETFs) and $1.8 trillion in assets under management as of September 30, 2018. iShares continues to drive progress for the financial industry. iShares funds are powered by the expert portfolio and risk management of BlackRock, trusted to manage more money than any other investment firm4.
1Bloomberg, BlackRock, as of 10/31/18
2Net expense ratio shown for BGRN reflects contractual fee waiver in place through 3/1/20. Gross expense ratio is 25 bps
3Bloomberg, BlackRock, as of 10/31/18
4Based on $6.44 trillion in AUM as of 9/30/18
Carefully consider the iShares Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses and, if available, summary prospectuses, which may be obtained by calling 1-800-iShares (1-800-474-2737) or by visiting www.iShares.com. Read the prospectus carefully before investing.
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This material represents an assessment of the market environment at a specific time; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular.
The Fund’s green bond investment strategy limits the types and number of investment opportunities available to the Fund and, as a result, the Fund may underperform other funds that do not have a green bond focus. The Fund’s green bond investment strategy may result in the Fund investing in securities or industry sectors that underperform the market as a whole or underperform other funds with a green bond focus. In addition, projects funded by green bonds may not result in direct environmental benefits.
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