VanEck has launched what it claims is the first "green bond" exchange-traded fund.
The VanEck Vectors Green Bond ETF (GRNB) consists of bonds issued "to finance projects or activities that promote climate change mitigation or adaptation, or for other environmental sustainability purposes," the firm said in a release.
VanEck said issuance of green bonds has grown rapidly since the European Investment Bank issued the first green bond in 2007. According to the Climate Bonds Initiative (CBI), an investor-focused nonprofit working to promote large-scale investment in the low-carbon economy, $81 billion of green bonds were issued in 2016 and $150 billion is expected to be issued in 2017.
The new VanEck ETF seeks to track the performance and yield characteristics of the S&P Green Bond Select Index (SPGRNSLT), whose requirements for securities include a bond issuer's disclosure of the rationale for issuance, the use of proceeds and being flagged as "green" by the CBI.
"Green bonds are simply conventional bonds with an environmentally friendly use of proceeds," said Ed Lopez, head of ETF product management and marketing at VanEck. "Global bond investors can make an allocation to green bonds without significantly altering the risk and return profile of their portfolio."