Vanguard has launched its first fixed income ESG ETF for US investors.
The Vanguard ESG US Corporate Bond ETF is benchmarked to the Bloomberg Barclays MSCI US Corporate SRI Select Index and is listed on the Chicago Board Options Exchange with a low expense ratio of 0.12%.
The ETF includes US dollar-denominated, investment-grade, fixed-rate, taxable corporate bonds with maturities of more than one year that are then screened by MSCI for certain ESG criteria. The exclusionary screening process includes removing bonds of companies that the index provider determines are involved in, and/or derive threshold amounts of revenue from, certain activities of business segments related to:
Agricultural/Environmental:
- Gas
- Genetically modified organisms
- Oil
- Thermal coal
Select Vices:
- Adult entertainment
- Alcohol
- Gambling
- Tobacco
Weaponry/Warfare:
- Civilian firearms
- Nuclear, controversial, and conventional weapons
- Nuclear power
In addition to those screens, Bloomberg and MSCI will exclude the bonds of companies that don’t meet certain diversity criteria or bonds of any company that, as determined by the Index provider, do not meet certain standards defined by the Index provider’s ESG controversies assessment, which measures a company’s involvement in major ESG controversies by assessing a variety of factors such as environmental impact, labor rights, human rights, community impact, governance, and compliance with the United Nations Global Compact Principles.