Sunday, July 3, 2022
Market-Reporter
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate
No Result
View All Result
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate
No Result
View All Result
Market-Reporter
No Result
View All Result
Home Bonds

ETF providers have been leading buyers of new fossil fuel bonds, finds study

MtR by MtR
June 14, 2021
in Bonds
0
ETF providers have been leading buyers of new fossil fuel bonds, finds study


Interested in ETFs?

Visit our ETF Hub for investor news and education, market updates and analysis and easy-to-use tools to help you select the right ETFs.

New bonds sold by fossil fuel companies were being snapped up by leading exchange traded fund providers including BlackRock and State Street even as these managers were preparing to pledge to slash their carbon emissions exposure, researchers have found.

About 14 per cent of the value of new bonds bought by 35 of the largest US corporate bond ETFs between 2015 and 2020 were issued by carbon-intensive companies in the oil and gas, utilities and coal mining sectors were , according to a new analysis by the Oxford Sustainable Finance Programme at the University of Oxford’s Smith School of Enterprise and the Environment.

The ETFs were run by BlackRock, State Street and DWS, which are signatories to the Net Zero Asset Managers Initiative set up in December 2020, as well as Pimco and Charles Schwab. Vanguard, the world’s second-largest asset manager after BlackRock and also a signatory, only discloses its ETF holdings on a monthly basis so it was not included in the Oxford analysis.

“It is when new bonds or shares are issued in primary markets and bought that capital actually flows from the financial system to the real economy. Financial institutions need to know how they are contributing to capital flows that could help or hinder tackling climate change,” said Ben Caldecott, founding director of the Oxford programme.

ETF providers should strategically choose which new bond issues to buy and finance only those companies that have robust plans to reduce carbon emissions, said Caldecott.

Newly issued corporate bonds are often sold at a discount to attract buyers. ETF managers can buy newly issued bonds before they are included in an index, which can provide a boost to a tracker fund’s performance. Purchasing the newly issued bonds, therefore, effectively means that the funds can gain an additional performance advantage from investing in these carbon-intensive industries.

Carlo Funk, head of environment, social and governance investment strategy for Europe at State Street Global Advisors, said that ETF providers were legally obliged to follow an index as closely as possible.

“There is some discretion available to asset managers when they use sampling to choose particular bonds but minimising an ETF’s tracking error compared with the underlying benchmark is still an imperative. Investors could potentially allow managers more wiggle room with tracking error but any change would require the agreement of clients or it could be seen as going against the ETF’s legally defined investment objective,” said Funk.

BlackRock, as the world’s largest fixed income ETF manager, was responsible for most of the purchases of newly issued bonds by carbon-intensive sectors along with State Street.

Top 10 ETF holders of new bonds issued by carbon intensive industries

Bonds issued by carbon-intensive sectors accounted for 14 per cent of the value of the new issues acquired between 2015 and 2020 by BlackRock’s $80.7bn iShares core US aggregate bond ETF, known as AGG.

Related articles

Bond ETFs Attract New Investors With Narrower Offerings – The Wall Street Journal

July 3, 2022

Private Placement | Corporate Bonds: Fund raising via debt placement drops 39% to Rs 32,405 crore in April-May on hike in interest rates

July 3, 2022

About 9.2 per cent of the value of the new bonds bought over the same five-year period by BlackRock’s $56.4bn iShares corporate bond ETF, known as LQD, were issued by carbon-intensive sectors.

BlackRock did not respond to requests for comment. However, Larry Fink, chief executive of the world’s largest asset manager, said in his annual letter to clients in January that the portfolios of BlackRock’s investors in aggregate remained carbon intensive.

“That cannot and will not change overnight, and BlackRock’s aggregate portfolio will necessarily be subject to the investment decisions of our clients,” wrote Fink.

Caldecott said a key question for ETF providers was whether climate factors played any role in the “active” investment decisions taken by ETF providers when evaluating new bond issues.

“Do they take account of environmental social or governance metrics?” he asked.

Click here to visit the ETF Hub



Source link

Related Posts

Bond ETFs Attract New Investors With Narrower Offerings – The Wall Street Journal

by MtR
July 3, 2022
0

Bond ETFs Attract New Investors With Narrower Offerings  The Wall Street Journal Source link

Private Placement | Corporate Bonds: Fund raising via debt placement drops 39% to Rs 32,405 crore in April-May on hike in interest rates

by MtR
July 3, 2022
0

Fund raising by listed companies through private placement of corporate bonds dropped 39 per cent to Rs 32,405 crore in...

Of bonds between fathers, daughters & granddaughters : The Tribune India

by MtR
July 3, 2022
0

Natasha Badhwar One of the gifts of raising children is witnessing their developing relationship with one’s parents. “Nana...

Blue bonds: An ocean of possibilities – The Daily Star

by MtR
July 2, 2022
0

Blue bonds: An ocean of possibilities  The Daily Star Source link

Bond for Kaitlin Armstrong, accused of killing pro cyclist Anna Moriah Wilson, set at $3.5 million

by MtR
July 2, 2022
0

A woman who was arrested in Costa Rica on Thursday after being accused of murdering a pro cyclist will be...

Load More
  • Trending
  • Comments
  • Latest

Bank of England tells ministers to intervene on digital currency ‘programming’

June 21, 2021

Tips for checking smoke alarms during daylight saving time

March 12, 2022

GLOBAL MARKETS-U.S. stocks follow Europe up; Treasury yields rise, dollar firm

July 9, 2021
Fed tapering and emerging markets

Fed tapering and emerging markets

June 7, 2021
African currencies week ahead: Zambia's kwacha seen on back foot, Kenyan shilling up – Business Recorder

African currencies week ahead: Zambia's kwacha seen on back foot, Kenyan shilling up – Business Recorder

0
Maxum Foods releases Global Dairy Commodity Update for June

Maxum Foods releases Global Dairy Commodity Update for June

0
Letter: Perpetual bonds can help states fight hunger

Letter: Perpetual bonds can help states fight hunger

0
United Kingdom ETFs Are Riding the Re-Opening Momentum

United Kingdom ETFs Are Riding the Re-Opening Momentum

0

Pine Nuts: Flunking Personal Finance Class

July 3, 2022

F1 fans praise ‘life saving’ halo after Zhou Guanyu survives horror crash at British Grand Prix

July 3, 2022

3 Disastrous Outcomes of Relying On Social Security Alone to Fund Your Retirement

July 3, 2022

Agent Spotlight: Shelly Ramos – The Grand Junction Daily Sentinel

July 3, 2022

Recent News

Pine Nuts: Flunking Personal Finance Class

July 3, 2022

F1 fans praise ‘life saving’ halo after Zhou Guanyu survives horror crash at British Grand Prix

July 3, 2022

3 Disastrous Outcomes of Relying On Social Security Alone to Fund Your Retirement

July 3, 2022

Categories

  • Asia
  • Bonds
  • Canada
  • Commodities
  • Cryptocurrencies
  • Currencies
  • Emerging Markets
  • ETFs
  • Europe & Middle East
  • IPOs
  • Latin America
  • Mutual Funds
  • Personal Finance
  • Real Estate
  • Retirement
  • Spending & Saving
  • Stocks
  • U.S. Markets
  • Privacy & Policy
  • About Us
  • Contact Us
  • Advertise with us

© 2021 Copyright Market-Reporter

No Result
View All Result
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate

© 2021 Copyright Market-Reporter