Green bond ETFs make it easy for retail investors to add diversified exposure to green bonds to their portfolios. That way, investors can confidently ensure that their fixed-income goes toward environmentally-friendly projects without worrying about laddering, diversification, or any other concerns with managing a bond portfolio.
The iShares Global Green Bond ETF (BGRN) is the largest green bond ETF with more than $250 million in net assets. With more than 750 green bonds, it also has the most diverse bond portfolio. In addition, the fund charges a 0.2% expense ratio and offers a 0.81% trailing 12-month yield paid annually, making it an excellent option for investors.
The VanEck Vectors Green Bond ETF (GRNB) holds over 300 green bonds with a 0.2% expense ratio and a 2% trailing 12-month yield paid out in monthly distributions. Unlike BRGN, the fund focuses on U.S.-dollar denominated bonds certified by the Climate Bonds Initiative, meaning the portfolio may adhere to higher standards.
When investing in these ETFs, remember that green bond funds have many of the same risks as other fixed-income ETFs. For example, you may want to evaluate the bond portfolio’s duration for interest rate exposure and credit ratings for default risk while being mindful of each fund’s expense ratio and liquidity levels.