Future returns on the iShares Global Green Bond ETF (BGRN) aren’t set in stone. But there’s still a lot for conservative income seekers to like, explains utility sector expert Roger Conrad, editor of Conrad's Utility Investor.
The ETF is highly liquid and pays dividends monthly at an attractive indicated annualized yield of 3.43 percent. But its best feature is the type of bonds it holds: Investment grade “green” bonds that are used to finance projects deemed beneficial for the environment.
Up until recently, I’ve been highly skeptical of green bonds’ worthiness as an investment vehicle. The companies able to issue them have received very low cost financing, which is always a plus for shareholders.
But the most attractive issues have been almost exclusively reserved for large institutions. That’s left only questionable crumbs for individuals.
What’s changed now is green bonds are starting to come of age as an asset class. And this iShares ETF is solid proof of that, with 484 high quality holdings from a wide range of countries and industries.
Currency exposure is mitigated by the fund’s adhering to the Bloomberg Barclays MSCI Global Green Bond Select (USD Hedged) Index.
The fund’s proof of concept since its November 2018 inception is its 6.3 percent year-to-date total return. That includes a top-to-bottom decline of just -7.5 percent in March, a time of extreme stress in global financial markets including currencies.
With the US set to rejoin the Paris Accords next year, ESG investing based on environmental, social and governance principles is enjoying an unprecedented boom.
That makes it certain green bond issues will continue to mushroom, which means more supply for ETFs like this one to fuel growth, even as growing investor interest continues to drive up prices. The iShares Global Green Bond ETF is a buy up to $58.