BetaShares has listed the first Diversified Bond ETF in Australia with a significant allocation to green bonds.
The Sustainability Leaders Diversified Bond ETF - Currency Hedged (GBND) will track an index of green bonds issued by companies and governments that have been vetted to avoid exposure to the fossil fuel industry or bond issuers engaged in activities "deemed inconsistent with responsible investment considerations."
Speaking to Financial Standard, BetaShares chief executive Alex Vynokur said fixed income offers important diversification and defensive benefits in investment portfolios.
"GBND provides a solution for investors and advisers who are seeking the benefits of fixed income, but want to do so in a responsible way," Vynokur said.
"As interpretations of ethical investing can vary 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. The screening process each bond must pass enables GBND to offer 'true to label' exposure."
A fossil fuel screen will be applied to ensure no bond issuer has fossil fuel reserves or infrastructure and are not involved in the mining, extraction or the burning of fossil fuels.
The fund will also remove any issuers which are exposed to gambling, tobacco, animal cruelty, alcohol, pornography and human rights violations.
The fund will also exclude companies that show a lack of board-level gender diversity and those that are involved in uranium and nuclear energy, chemical of concern or the destruction of the environment.
Vynokur said responsible investing should no long be considered a "niche area" of the investment industry.
"Responsible investing was previously considered a niche area of the investment industry, but the data is showing that this assumption no longer holds true. The Responsible Investment Association of Australia estimates there is more than $2.96 trillion invested in ethical strategies around the globe."
Vynokur added, in Australia the market cap for ethical ETFs has risen by more than 230% since 2017.
Bonds will only be eligible if they bare denominated in Australian dollars, Euro or US dollars, are rated investment grade at a minimum Standard & Poors or Moody's Investor Services, be at least one year old, have senior or higher ranked debt instruments and are fixed rate.
Bonds will also be assessed on an annual basis by the Responsible Investment Committee.
The listing follows four other fund listings from BetaShares this week. BetaShares said the diversified low-cost ETFs were designed to provide exposure to a blended portfolio of asset classes, including shares, property securities, bonds and cash.