BetaShares Sustainability Leaders Diversified Bond ETF - Currency Hedged

Product Name

BetaShares Sustainability Leaders Diversified Bond ETF - Currency Hedged

Issuer

BetaShares

Category

Index

Type

Exchange Traded Fund (ETF)

Target

Retail, Wholesale, Institutional

Certified Since

2020

Asset Classes

Fixed income

Markets

Australia

Investment Approaches

Negative Screening, Positive Screening

It Includes:

  • Riaa icons 10 Renewable energy and energy efficiency

It has some level of screening for:

  • Riaa icons 41 Alcohol
  • Riaa icons 33 Fossil fuels
  • Riaa icons 99 Pornography
  • Riaa icons 35 Tobacco

It fully excludes:

  • Riaa icons 56 Animal cruelty
  • Riaa icons 36 Armaments
  • Riaa icons 52 Human rights abuses
  • Riaa icons 38 Labour rights violations
  • Riaa icons 50 Nuclear power

Overview

The Index comprises a portfolio of fixed rate, investment grade global and Australian bonds, with a significant allocation to green bonds, that have been screened to avoid bond issuers with material exposure to the fossil fuel industry or bond issuers engaged in other activities deemed inconsistent with responsible investment considerations. Bond issuers may be corporations, governments or government agencies in developed and emerging markets, or supranational bodies. 50% of the index weight will be allocated to Australian dollar-denominated bonds and 50% to Euro/U.S. dollar-denominated bonds at each monthly rebalance. The foreign currency exposure of index constituents is hedged back to the Australian dollar. In addition, bonds must be assessed on an annual basis by the Responsible Investment Committee established by the Responsible Entity as having passed certain ESG-screens designed to exclude bond issuers that have material exposure to the fossil fuel industry or that are engaged in other activities deemed inconsistent with responsible investment considerations (as further outlined in “ESG-screening criteria” below). Bonds that satisfy the above criteria must then qualify as either green bonds or other ESG-screened bonds, as set out below. Green bonds • must be green bonds as defined by the Climate Bonds Initiative; and • must have an outstanding amount of at least 300 million in their respective currency. Other ESG-screened bonds These are non-green bonds that, in addition to having passed the ESG-screens, also satisfy the following requirements: • must be denominated in Australian dollars and be issued in the Australian market; • bond issuers must be non-sovereign issuers (i.e. Commonwealth Government bonds are excluded); and • must have an amount outstanding of at least AUD500 million. ESG-screening criteria A fossil fuel screen is applied to the eligible universe of securities to remove bond issuers which have fossil fuel reserves, fossil fuels infrastructure, or those involved in the mining, extraction or burning of fossil fuels. The universe is also screened to remove bond issuers which are exposed to activities considered to carry other significant negative ESG risks. The business activities screened out in this process are: • Gambling; • Tobacco; • Uranium and nuclear energy; • Armaments and militarism; • Destruction of valuable environments; • Animal cruelty; • Chemicals of concern; • Alcohol; • Junk foods; • Pornography; • Human and labour rights violations; and • Lack of board-level gender diversity. Certain materiality thresholds outlined in the index methodology are applied in the screening process. In relation to the fossil fuels and uranium/nuclear energy screens, the materiality threshold applied to green bonds is slightly less strict than for other bonds. The above screens apply to all bond issuers other than sovereign bond issuers. Sovereign bond issuers are screened to remove any issuers that are subject to current sanctions as a result of human rights concerns imposed by international bodies such as the United Nations and European Union. A bond issuer exposed to significant ESG-related reputational risk or controversy may also be excluded where the Responsible Investment Committee considers that its inclusion would be inconsistent with the values of the Index. Between the annual ESG-screening reviews, bonds may be removed from the Index on the advice of the Responsible Investment Committee where there is a material failure to meet the ESG screens.


Description


BetaShares Sustainability Leaders Diversified Bond ETF – Currency Hedged (ASX:GBND) provides exposure to a globally diverse range of fixed-rate bonds that either directly help finance environmentally supportive projects (i.e. “green bonds”) or raise funding for companies that meet stringent environmental, social and governance (ESG) guidelines for socially-responsible behaviour. 

Specially, for any bond to be included in the Index that GBND aims to track, its issuer must not have material exposure to the fossil fuel industry or a wide range of other activities considered to carry significant ESG risks.

The fossil fuels exclusion covers the mining, extraction, or burning of fossil fuels, or the maintenance of material fossil fuel reserves or fossil fuels infrastructure. Issuers providing material financing to the fossil fuels industry are also excluded (although green bonds from such issuers may be eligible, subject to materiality thresholds). 

Other excluded activities cover:
1 Solactive Australian and Global Select Sustainability Leaders Bond TR Index - AUD Hedged (the “Index”)
•  Gambling; •  Tobacco; •  Uranium and nuclear energy; •  Armaments and militarism; •  Destruction of valuable environments; •  Animal cruelty; 
•  Chemicals of concern; •  Alcohol; •  Junk foods; •  Pornography; •  Human and labour rights violations; •  Lack of board-level gender diversity.
Certain materiality thresholds are applied in the screening process. 
The above screens apply to all bond issuers other than sovereign bond issuers. Sovereign bond issuers are screened to remove any issuers that are subject to current sanctions as a result of human rights concerns imposed by international bodies such as the United Nations and European Union.
These issuer-based screens seek to ensure that even if a bond might be used to finance specific environmental projects, investors are not supporting issuers that are nonetheless more broadly engaged in activities inconsistent with their values.


Along with screening out certain bond issuers, another aim of GBND is to provide significant exposure to bonds specifically issued to finance environmentally friendly projects (“green bonds”).  While issuers often label their bonds as green or climate friendly, the Index which GBND aims to track only selects from green bonds that satisfy standards set by the internationally recognised non-profit organisation, the Climate Bonds Initiative (CBI). 

To be defined as a “green bond” by the CBI, at least 95% of monies raised from a bond must be clearly earmarked to finance recognised types of climate friendly projects. Acceptable projects, for example, can include those designed to prevent or reduce pollution, improve the sustainable use of natural resources, or help in the transition to “cleaner” nonfossil fuel-based technologies.  

Other products certified by the Responsible Investment Association Australasia (RIAA)

BetaShares Global Sustainability Leaders ETF (ASX: ETHI)

BetaShares Australian Sustainability Leaders ETF (ASX: FAIR)

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