Nuveen Debuts Socially Responsible Bond ETF

October 02, 2017

Today Nuveen rolled out yet another socially responsible ETF, and this one targets the fixed-income space. The NuShares ESG U.S. Aggregate Bond ETF (NUBD) is one of the very few funds to offer exposure to the fixed-income space through the lens of an environmental, socially responsible and governance-focused perspective.

NUBD is listed on the NYSE Arca and comes with an expense ratio of 0.20%.

The fund’s index is derived from the Bloomberg Barclays U.S. Aggregate Bond Index, and uses the same approach to ESG criteria as Nuveen’s equity ESG funds, evaluating companies based on multiple criteria within each of the three major ESG buckets. The parent index is widely used and covers domestic investment-grade taxable debt.

Fixed Income & ESG

NUBD’s underlying index incorporates additional modifications to its ESG methodology to accommodate the differences in the fixed-income market.

Governments issuing securities, in particular, are evaluated according to six criteria, according to the prospectus: natural resources; environmental externalities & vulnerability; human capital; economic environment; financial governance; and political governance.

However, asset-backed and mortgage-backed securities are automatically included in the index, and are not screened for ESG criteria.

The index’s components are weighted by market value, with individual sectors adjusted to reflect their weights in the parent index.

Currently, there are four other ETFs that apply ESG standards to fixed income, the largest of which is the $20 million Inspire Corporate Bond Impact ETF (IBD). Including the new fund, Nuveen offers a total of 11 ETFs, eight of which are ESG funds.

KraneShares Plans 4 China Funds

A new filing from KraneShares outlines plans for four new ETFs—three tracking sector indexes and one covering the high-yield bond space. The proposed ETFs are as follows:

KCCB, the only fund with a ticker, will track the Solactive USD China Corporate High Yield Bond Index, which covers debt issued by China and Hong Kong companies that is denominated in U.S. dollars.

The universe of eligible securities includes a variety of types of debt, and among other requirements, the methodology requires they all be at least 40 days old, have two to five days remaining to maturity or no maturity date, be free of defaults, have a minimum par value of $300 million and be issued by firms with at least $1 billion in total outstanding debt. Individual issuers are limited to 5% of the index.

A Trio Of Sectors
Meanwhile, the equity sector funds track subsets of the MSCI China All Shares Index, a comprehensive index that covers almost every conceivable type of mainland and offshore China-related equity securities, including A-, B- and H-shares; P-chips; red chips and American depositary receipts. The indexes are all weighted by free-float market capitalization with adjustments made to reflect the availability of each security to foreign investors.

According to the prospectus, A-shares are shares of companies that are domiciled in mainland China and traded on the two mainland exchanges; they only recently have become more easily available to foreign investors.

B-shares are stocks of mainland companies that are traded primarily in foreign currencies and easily accessible by foreign investors.

H-shares also represent mainland companies but are listed on the Hong Kong Stock Exchanges, while N-shares represent shares of mainland companies that are listed on U.S. exchanges.

P-chips are private companies that are incorporated outside mainland China but conduct most of their business there and have mostly Chinese controlling shareholders. They generally trade on the HKSE in Hong Kong dollars. Red chips are very similar, but are controlled by branches of mainland China’s local or national government, the prospectus said.

An MSCI document indicates that, as of Aug. 31, the consumer discretionary sector represented 9.97% of the broad index, while consumer staples had a weight of 4.41% and health care was at 3.72%.

Contact Heather Bell at [email protected]

 

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