Vanguard has launched two new socially responsible fixed income ETFs in Europe targeting corporate bonds denominated in US dollars or euros.
Vanguard now offers three ESG-considered corporate bond ETFs in Europe.
The Vanguard ESG USD Corporate Bond UCITS ETF and Vanguard ESG EUR Corporate Bond UCITS ETF have been rolled out across the continent with listings on London Stock Exchange, Deutsche Börse Xetra, Borsa Italiana, SIX Swiss Exchange, and Euronext Amsterdam.
The funds are designed to serve as core building blocks for socially responsible portfolios, providing broad diversification while incorporating robust screening based on environmental, social, and governance (ESG) criteria.
The ETFs are available in both accumulating and distributing share classes as well as with currency hedging.
Each fund comes with an expense ratio of 0.11% for its unhedged share class and 0.16% for any currency-hedged share class.
Methodology
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The ETFs are linked to the Bloomberg MSCI USD Corporate Float-Adjusted Liquid Bond Screened Index and Bloomberg MSCI EUR Corporate Float-Adjusted Liquid Bond Screened Index.
The indices are constructed from parent universes comprising investment-grade, fixed-rate corporate bonds from both developed and emerging markets issuers. Eligible issues must have at least one year remaining until maturity and an issue size greater than or equal to $750 million for the USD index or €500m for the EUR index.
The ESG screening methodology harnesses insights from MSCI ESG Research to remove issuers in violation of UN Global Compact principles as well as those deriving any revenue from adult entertainment, alcohol, gambling, tobacco, nuclear weapons, controversial weapons, conventional weapons, civilian firearms, nuclear power, genetically modified organisms, or fossil fuels.
The remaining issuers are weighted by market value, and the indices are rebalanced on a monthly basis.
The new listings complement the Vanguard ESG Global Corporate Bond UCITS ETF which Vanguard introduced in May 2021. This fund applies the same ESG screening approach to a broader initial universe of investment-grade corporate bonds denominated in any of several major global currencies. It comes with an expense ratio of 0.15% and is available in a range of currency-hedged share classes.