VanEck launches investment-grade sustainable municipal debt securities ETF

VanEck has launched the VanEck HIP Sustainable Muni ETF, designed to offer exposure to investment-grade municipal debt securities that focus on sustainability as well as positive social, environmental and economic outcomes or mission accomplishment.

"We’re seeing investor interest in municipal bonds hitting levels not seen since the early 1990s, along with a concurrent increase in focus around sustainable investing approaches, especially in the fixed income marketplace,” says Jim Colby, Portfolio Manager with VanEck. “SMI offers investors a core portfolio tool that hones in on those municipal debt securities that are facilitating projects with sustainable and positive impact. We’re excited to be launching this unique sustainability-focused muni ETF using HIP Investor’s data and ratings, and to be providing a new strategy for those looking for impactful exposure in the tax-exempt fixed-income sleeve of their portfolios.”

The firm writes that SMI combines VanEck’s leadership in municipal bond ETFs with independent research firm HIP Investor’s ratings for 120,000 bonds on “human impact and profit” potential. SMI is an actively managed strategy focusing on investment-grade state and local government debt that funds projects promoting sustainable development, including affordable housing, green spaces and hospitals.

Using data from HIP Investor (“HIP”), the portfolio management team integrates four screens to determine a bond’s eligibility for inclusion: climate threat resilience; proximity to opportunity zones, which are typically home to lower-income and racially diverse populations; ESG ratings; and SDGs 9, 11 and 12- the SDGs were adopted by the United Nations General Assembly to achieve sustainable development for all, and the specific goals of SDGs 9, 11 and 12 are as follows: SDG 9 is to "build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation," SDG 11 is to "make cities and human settlements inclusive, safe, resilient and sustainable," and SDG 12 is to "ensure sustainable consumption and production patterns."

“For 15 years, HIP’s analytical rigor has evaluated real-world impacts for investors, advisors and fund managers, enabling more capital to flow to innovators bringing sustainable solutions for people, planet and trust,” says R. Paul Herman, CEO and founder of HIP Investor. “This new ETF enables portfolios to focus on meaningful climate action, increasingly sustainable communities and stronger resilience overall.”

“We believe combining active management with the robust analytical data on sustainability provided by HIP results in a compelling, first-to-market municipal bond ETF1. SMI is a welcome addition to our established lineup of seven municipal bond ETFs with currently over USD7 billion in combined AUM as of July 31, 2021,” says Colby, who is the portfolio manager of the new strategy.

VanEck is a 2017 signatory to the Principles for Responsible Investment (PRI) and has decades of experience in fixed income and municipal bond strategies. SMI also illustrates the expansion of the firm’s sustainable investing offerings, joining last month’s launch of the VanEck Environmental Sustainability Fund (ENVAX), the first green bond ETF1, VanEck Green Bond ETF (GRNB) and the VanEck Low Carbon Energy ETF (SMOG). HIP is a 2021 signatory to PRI.

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