Goldman Sachs Asset Management has launched a new ETF in Europe offering broad exposure to green bonds, diversified across currencies and fixed income sectors worldwide.
Goldman Sachs is a leading manager of open-ended green bond UCITS funds.
The Goldman Sachs Global Green Bond UCITS ETF has been listed on London Stock Exchange (Ticker: GSGR LN) and SIX Swiss Exchange (GSGR SW) in euros.
The fund is also available through a sterling-hedged share class on LSE (GREN LN) as well as euro-hedged share classes on Borsa Italiana (GSGR IM) and Xetra (GSXG GY).
Green bonds are financial instruments designed to raise funds specifically for projects with environmental benefits, such as renewable energy, energy efficiency, and pollution reduction. They play a pivotal role in funding the climate transition, as evidenced by the record issuance of green bonds in 2023 from a growing range of issuers.
Green bond ETFs can deliver diversified exposure to the green bonds market, enabling investors to replace a portion of their existing fixed income portfolios with bonds that meet sustainable investment criteria.
GSAM’s launch of its first green bond ETF in Europe builds on the firm’s strong foundation in green bond investing, where it stands as a leading manager of open-ended green bond UCITS funds, distinguished by both the size of assets under management and the net inflows received in 2023.
Bram Bos, Global Head of Green, Social & Impact Bonds at Goldman Sachs Asset Management, commented: “The latest addition to our growing green bonds fund range demonstrates our continued commitment to offer investors a plethora of ways to access the green bonds markets. Today’s green bond investors include a growing number of traditional fixed income clients, not just those focused primarily on impact and environmental, social and governance criteria.”
Hilary Lopez, Head of EMEA Third Party Wealth at Goldman Sachs Asset Management, added: “The global green bond market is an increasing source of opportunity for investors as they look to complement their fixed income exposure with dedicated green, social and impact bonds. We are delighted to be launching this innovative product which brings the expertise of our green bonds team to an ETF format for the first time.”
Methodology
The fund is linked to the Solactive Global Green Bond Select Index which was developed by index provider Solactive in partnership with GSAM’s dedicated Green, Social, and Impact Bonds team.
The index is composed of investment-grade green bonds issued in G10 currencies, encompassing a variety of sectors including Treasury, corporate, government-related, and securitized bonds, with taxable municipals also eligible. To qualify, bonds must meet specific issuance size criteria.
A rigorous investment screening is applied by the Green, Social, and Impact Bonds team, evaluating both issuers and individual bonds through a multifaceted sustainable criteria framework. This includes controversy and sector exclusions, as well as an assessment of the issuers’ policies on climate transition, an approach that is designed to favour issuers demonstrating lower climate risk compared to traditional benchmarks.
The index is weighted by the market value of the underlying green bonds subject to a cumulative cap of 50% on bonds denominated in any particular currency.
The ETF comes with an expense ratio of 0.22% and is classified as an Article 9 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
In Europe, various ETFs offer exposure to distinct segments of the green bond market. However, for investors seeking comprehensive diversification across sectors and currencies within the global green bond arena, the UBS (Lux) Fund Solutions – Global Green Bond ESG 1–10 UCITS ETF (CHSA GY) may also be considered. This ETF follows the Bloomberg MSCI Global Green Bond 1-10 Year Sustainability Select Index, which includes Treasury, corporate, government-related, and securitized bonds, all with investment-grade ratings. It has an expense ratio of just 0.15%.