Industry Updates

VanEck corporate bond ETF latest to get ESG revamp

A larger weighting will be allocated to higher ESG scoring issuers

Theo Andrew


VanEck has switched the index on its corporate bond ETF to one that incorporates ESG metrics in response to exploding demand for sustainable products.

Effective 28 February, the VanEck iBoxx EUR Corporates UCITS ETF (TCBT) switched from tracking the Markit iBoxx EUR Liquid Corporates index to the iBoxx SD-KPI EUR Liquid Corporates index.

The new index follows a similar strategy to the former index with the addition of Sustainable Development Key Performance Indicator (SD-KPI) values.

As a result, a larger weighting will be allocated to bond issuers with higher SD-KPI values and visa-versa which will be measured by German data provider SD-M.

TCBT is now classified as Article 8 under the Sustainable Finance Disclosure Regulation (SFDR). The ETF’s name and total expense ratio (TER) of 0.15% will remain unchanged.

In a shareholder notice, VanEck said: “VanEck experiences increasing demand for sustainable investment solutions. These sustainable characteristics are becoming more and more the norm for investors leaving less room for mainstream products.

“VanEck expects that the demand for the funds incorporating ESG criteria will substantially increase going forward whereas the demand for the funds, that do not incorporate ESG considerations in the portfolio construction process will further deteriorate going forward.”

It is the latest in several switches to ESG indices undertaken by VanEck as it continues to improve the sustainable footprint of its product range.

The issuer added an ESG screen to the VanEck European Equal Weight UCITS ETF (TEET) and double its fees from 0.20% to 0.40% in the process.

Furthermore, both the $885.8m VanEck Vectors Semiconductor UCITS ETF (SMGB) and the $78.4m VanEck Vectors Hydrogen Economy UCITS ETF (HDRO) also saw their ESG methodology tightened.

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