One ETF to Ponder as ESG Bond Volume in Asia Increases ETFdb.comOne ETF to Ponder as ESG Bond Volume in Asia Increases ETFdb.comOne ETF to Ponder as ESG Bond Volume in Asia Increases ETFdb.com
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Globally, environmental, social, governance (ESG), bonds are being sold. It appears that Asia will be the next destination to see an increase in demand next year.
According to a South China Morning Post article JPMorgan stated that ESG-linked bonds will double in 2022. ESG bond issuances have already reached $58.6 Billion this year as investors seek to align their ESG goals, such as addressing climate change, with their investing objectives.
Jessica Chen, cohead of ESG financing Asia ex-Japan at JPMorgan, stated that there are many factors that will drive ESG bond growth. These include increased investor demand, greater acceptance of ESG strategies and the need for finance them, as well as government policy and regulatory requirements.
Chen said that he expected to see more harmonisation between local and global standards, a greater alignment of ESG financing and issuers’ targets for decarbonisation, and a greater focus on disclosure and transparency from both investors and issuers.
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ESG bonds are expected to be in demand in Asia. However, U.S. investors may choose ETFs such as the Vanguard ESG U.S. Corporation Bond ETF (VCEB). Fixed income investors can combine corporate bonds yield and ESG principles with VCEB.
VCEB’s fund description states that it seeks to track the performance and future prospects of the Bloomberg MSCI US Corporate SRI Select Index. The index excludes bonds with a maturity of less than one year and less than $750 millions outstanding. It is independently screened by the index provider for ESG criteria.
Highlights from the VCEB:
Provides a screening service for debt issues that meet certain ESG criteria.
Excluded are bonds of companies that, according to the index sponsor, are involved in or derive threshold amounts from certain activities or business segments. These activities include: alcohol, gambling and tobacco, nuclear weapons, controversial weapon, conventional weapons, conventional weapons, civilian firearms or nuclear power.
Excludes bonds of companies which, according to the index sponsor, fail to meet certain standards as defined by the ESG controversies assessment framework. Also excluded are firms that do not have at least one woman on the boards.
Visit the Fixed Income Channel for more information and strategy.