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Green Bonds Versus Other ESG Strategies

Green bonds are defined by the projects they finance with a focus on environmental impact. ESG-scored strategies, the score represents a broader assessment of the issuer's activities and their environmental, but also social and governance indicators. An ESG score is an opinion of the provider of that score and we find that they can vary widely. In fact, a study by MIT foundthat among the top five ESG research providers, there's only about a 10 to 15% correlation of ESG scores. That's reflective of the different methodologies they use and the inherent subjectivity involved with ESG-scored strategies.

We think green bonds can be a solution to this problem. They are less subjective because they're defined by the projects they finance rather than the broader activities of the issuer. They're also more direct because they allow investors to direct capital to projects that have a positive environmental impact. We would say they're more forward looking as well because it's not based on a backwards looking assessment of ESG data, but rather on projects that will have a future benefit.

 

VanEck’s Philosophy

At VanEck, we focus on providing access to forward-looking investment strategies. Hand-in-hand with that is our philosophy on ESG, which is that ESG factors are integral to the investment process because of the associated risks and potential impact on long-term returns. On the active side, our investment teams analyze these factors and actively engage with companies to identify issuers that could provide better long-term investment outcomes for investors. On the passive side, one way we carry out this philosophy is through product development. We ask: "What is the world going to look like in 10, 20 years? What are the trends that are shaping or going to shape the future economy?"

For example, we know about the transition that is happening towards a low-carbon economy. And we also know about the huge need to finance that transition. So we launched GRNB, recognizing that huge growth that is expected in this market. GRNB fits in with our general ETF philosophy of providing efficient access, transparency, and a pure exposure. It also aligns with our ESG philosophy, in that incorporating ESG factors into a portfolio, whether through active or passive strategies, can lead to better long-term investment outcomes.

1Climate Bonds Initiatives

2Climate Bonds Initiatives

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IMPORTANT DISCLOSURE

The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Any discussion of specific securities mentioned in the video is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com.

An investment in the VanEck Vectors Green Bond ETF may be subject to risks which include, among others, green bonds, investing in European and emerging market issuers, foreign securities, foreign currency, credit, interest rate, high yield securities, supranational bond, government-related bond, restricted securities, securitized/asset-backed securities, financial services, utilities, market, operational, call, sampling, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and concentration risks, all of which may adversely affect the Fund.

Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.

No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Securities Corporation. © Van Eck Securities Corporation.

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