Shades of Green in the Bond Market (Part 1)

Most bond ETFs that emphasize ESG criteria are limited to applying them to the nonsovereign portions of their portfolios.

Morningstar ETF Analysts 07 April, 2021 | 18:07
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ESG integration in bond funds is difficult. ESG-relevant data is often sparse and inconsistent. It also involves trade-offs. ESG integration introduces active risk that may or may not be rewarded. ESG-intentional bond funds navigate these challenges in a variety of ways. Here, I’ll examine a sample from the menu of ESG-intentional bond exchange-traded funds to illustrate these issues.

It’s Not Easy for Bond Investors to Be Green

Investors aiming to incorporate ESG criteria in fixed-income portfolios face many of the same challenges as equity investors. These issues range from whether ESG risks are better managed via ownership and engagement or through exclusions, to whether ESG is a factor in and of itself.

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Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure.

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