UBS Asset Management’s sustainable development bank bond strategy passed $1bn assets under management (AUM) amid the increasing uptake of fixed income ESG ETFs in Europe.

The UBS ETF Sustainable Development Bank Bonds UCITS ETF (MDBUA) was not only the first to invest in bonds issued by development banks but has now cemented its position as the largest product in class. 

Replicating the performance of the Solactive Global Multilateral Development Bank Bond USD 25% Issuer Capped index, MDBUA tracks a basket of multilateral development bank bonds with ratings of AAA from Moody’s, S&P Global and Fitch Ratings.  

The ETF includes bonds from the World Bank, Asian Development Bank, European Bank for Reconstruction and Development, Inter-American Development Bank and African Development Bank, which are issued to raise funds for projects to alleviate poverty, improve infrastructure and protect the environment.  

Issuance volumes are expected to remain high in the coming months with the World Bank alone expected to deploy as much as $150bn in COVID-19 support up until June 2021. 

With development bank expenditure targeting Sustainable Development Goals, UBS AM also touts the potential of MDBUA to be viewed as a tool for impact investing, and a higher-yielding sustainable alternative to US Treasuries of the same duration. 

Clemens Reuter, global head of ETF and index fund client coverage at UBS AM, commented: “Our clients see development bank bonds as an attractive means of improving the sustainability profile of their portfolios while supporting high-impact development projects across the world.” 

MDBUA’s AUM breakthrough follows a string of headlines for UBS AM sustainable products, with the issuer announcing 10 ESG ETF launches within the final two weeks of March.

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