VanEck has lowered the expense ratio on the VanEck Vectors Green Bond ETF (GRNB US) from 0.40% to 0.30%.

Ed Lopez, Head of ETF Product with VanEck.

The fund, which is listed on NYSE Arca, tracks the S&P Green Bond Select Index, provides exposure to the fast-growing green bond market

“Investors are increasingly incorporating environmental and social factors into their investment process, alongside traditional financial risk and return metrics,” said Ed Lopez, Head of ETF Product with VanEck.

He added: “There is increasing recognition that incorporating these factors may result in better long-term investment outcomes. This fee reduction will allow investors to build sustainable fixed income portfolios that have a positive environmental impact, without a significant impact to their risk and return profile.”

The index is composed of bonds issued by supranational, government, and corporate issuers globally. Green bonds issued from any country and in any currency are eligible for index inclusion as long as they have been flagged as “green” by the Climate Bonds Initiative (CBI), a non-profit organisation that is working to promote large-scale investment in the low carbon economy.

According to CBI, green bonds are instruments in which the proceeds will be exclusively applied (either by specifying use of proceeds, direct project exposure, or securitization) towards new and existing green projects, with green projects defined as projects and activities that promote climate or other environmental sustainability purposes.

The bonds must also meet ongoing transparency and reporting requirements to ensure that proceeds are solely used for low-carbon and climate-enhancing projects.

Constituents are weighted based on market value, subject to a 10% issuer cap and a 20% high yield cap.

The index currently shows a yield-to-maturity of 7.3% and has an effective duration of 6.4 years. Income is distributed to investors on a monthly schedule.