BetaShares adds new Diversified Bond ETF to ethical range
Australian ETF manager BetaShares has launched an ETF that gives investors access to a diversified portfolio of high-quality global and Australian bonds that meet strict responsible investment criteria.
The BetaShares Sustainability Leaders Diversified Bond ETF – Currency Hedged (ASX: GBND) is also the first ETF available on ASX that specifically allocates a significant proportion of its portfolio to ‘green bonds’.
BetaShares CEO, Alex Vynokur, says: “Exposure to fixed income offers important portfolio diversification and defensive benefits. The launch of GBND provides a solution for investors and advisers who are seeking the benefits of fixed income but want to do so with a focus on sustainability.”
The index that GBND aims to track utilises strict environmental, social and governance (ESG) screening processes to select eligible bonds. Bond issuers are excluded if they have material exposure to the fossil fuel industry or are engaged in other activities that carry significant ESG risks, including gambling, tobacco and a lack of gender diversity at board level.
In addition, at least 50 per cent of GBND’s portfolio will be made up of independently verified ‘green bonds’, i.e. bonds issued to directly fund projects that have positive environmental and/or climate benefits, as certified by the Climate Bonds Initiative, an internationally-recognised non-profit organisation. The green bond issuer must also have passed the screening process outlined above.
“With interpretations of responsible investing varying widely, we’re finding investors want to know that their money is being invested in a way that aligns with their values, rather than ethical in name alone”, says Vynokur. “The strict screening process each bond must pass enables GBND to offer ‘true to label’ ethical investment exposure.”
In order to provide a globally diversified bond portfolio, 50% of the portfolio’s value will be AUD-denominated, with the remainder allocated to bonds denominated in Euro or USD. The foreign currency exposure of the global bonds is hedged back to the AUD.
The launch of GBND has come at a time when responsible investing is increasingly entering the mainstream. According to the Responsible Investment Benchmark Report 2019 Australia, there is now approximately AUD3 trillion invested in ethical strategies around the globe. In Australia, the market capitalisation for ethical ETFs has risen over 230 per cent since 20171 and a recent report authored by Monash University found climate change and environmental issues are now Australians’ second-biggest concerns after the economy.
“The statistics make it clear that global and Australian investors alike are increasingly using ethical investment options as they realise the impact their money can have on promoting positive environmental and social outcomes,” says Vynokur.
GBND joins BetaShares’ already leading range of ethical ETFs, which currently provide investors access to a high-quality portfolio of Global Shares (ASX: ETHI) and Australian Shares (ASX: FAIR) using similar rigorous eligibility screening.
ETHI and FAIR are now the largest ethical ETFs on the ASX, with combined AUM exceeding AUD800 million, having captured over 70 per cent of assets flowing into ethical ETFs since their launch in 20174.
“ETHI and FAIR have been very well-received since their launch. And now with the launch of GBND, investors can easily build a diversified ethical portfolio with exposure to both bonds and equities, all via the ASX.”