Head of ETF Product Management
Tell us about green bonds.
Green bonds are bonds with proceeds that are designated to be used towards green projects…could be energy renewal, energy generation to renewable sources, could be energy efficiency buildings…transport…water conservation. There are a number of themes and areas where green bond projects could be financed.
These green bonds are a growing area of the market—a part of the environmental sustainability impact investing market. It's approximately 200 billion in market size; issuance doubled over the last couple years and it is expected that issuance could double again in 2017.
We think green bonds are a way that investors can help GREEN their portfolio and actually drive funds towards beneficial projects that benefit the economy or benefit the environment.
Why launch a green bond ETF now?
We’ve seen a total shift in terms of investor preferences and values over the last 30 years. With many more investors interested in ESG investing, sustainable investing.
Most recently, the US SIF, the Forum for Sustainable and Responsible Investment, put out their 2016 biannual report on ESG investing. And they highlighted that in the U.S., there’s just over $8 trillion dollars tied to ESG strategies. So investor demand has grown significantly. And that $8 trillion figure represents a 30% increase from 2014, the last time they came out with that report. So there’s been tremendous demand for these types of impact and sustainable investing options. And the green bond market is an outgrowth of that.
This was very much in the wheelhouse of the type of product that VanEck launches, being very forward thinking, and intelligently designed, and allowing investors to access important areas of the market.
What market exposure does your ETF provide?
Our ETF is a global bond fund. There’s exposure to different currencies, the Euro and the U.S. dollar are the biggest components, but there are other currencies as well. Other countries such as France, for instance, and the United States as well as some other emerging market and developed countries. So you have a mix of different segments; it’s really a global aggregate — that’s the way to look at it.
It’s primarily investment grade. Many of the initial issuers were supernationals of development banks.
But ever since the Paris Accord in 2015, sovereigns have come in, in a pretty big way. Most recently with France, with a $7.5 billion bond issue earlier this year. And corporations, such as Apple. Apple issued a $1.5 billion bond issue last year, and that’s a very prominent issuer in the green bond space. So the type of exposure you get is really that aggregate bond exposure.
What role do advisors / broker-dealers play in new ETF construction?
So the role of broker-dealers and advisors play in ETF construction is providing feedback and information about the ETFs that we launch. They offer us ideas throughout our regular conversations with them. We listen to the market participants — what problems are they trying to solve, what goals are they trying to achieve, etc. They’re an integral part of our product development process.
What other factors influence your ETF construction process?
The factors that influence our construction process vary but primarily we want to be able to introduce an ETF which makes a difference — which is differentiated, adds value and solves the problem. Outside of that, the technical factors can include making sure that the underlying is liquid enough, that it’s big enough, that there’s not going to be any trouble creating that ETF and supporting that ETF on the market, and hopefully making it a very tradable product.
So we look for markets that are liquid, have enough volume to support an ETF but also offer a compelling investment thesis and opportunity for investors.
How does it feel to be on the NYSE podium and ring the Closing Bell?
Being on the podium today during the Closing Bell is always exciting; there’s so much history here. Working with the NYSE has been a strong partnership for VanEck. We always enjoy the opportunity to come here.