Vanguard Group, one of the largest fund companies in the world with over $6 trillion AUM, announced today the launch of the Vanguard ESG U.S. Corporate Bond ETF (VCEB), the company’s first ESG-focused ETF for US investors. Vanguard noted that the fixed income ESG market is an area that is experiencing growing investor demand.
The new ETF will seek to track the performance of the Bloomberg Barclays MSCI U.S. Corporate SRI Select Index. According to MSCI, the index, launched in 2019, is an investment-grade, US dollar-denominated benchmark that negatively screens out issuers with substantial revenue derived from sources such as adult entertainment, thermal coal, alcohol, gambling, tobacco, controversial military weapons, civilian firearms, nuclear power, and genetically modified organisms (GMOs), while only including issuers with at least a BBB ESG rating. Additionally, the index excludes all issuers involved in one or more very severe ESG controversies.
Kaitlyn Caughlin, head of Vanguard’s Portfolio Review Department, said:
“Investors are increasingly seeking opportunities to better align their investment objectives with their personal values. Vanguard’s new ESG U.S. Corporate Bond ETF better enables them to do exactly that. The ETF will provide our clients an efficient means of accessing the credit markets while employing a meticulous exclusionary screening process developed by MSCI and implemented by Bloomberg.”
The ETF will be managed by Josh Barrickman, principal, senior portfolio manager, and head of Vanguard Fixed Income Indexing Americas, and Vanguard’s Fixed Income Group, one of the world’s largest fixed income investment managers, will serve as the advisor.
The new ETF adds to the firm’s suite of ESG products, including the Vanguard ESG U.S. Stock ETF (ESGV) and Vanguard ESG International Stock ETF (VSGX), and an actively-managed offering, Vanguard Global ESG Select Stock Fund (VESGX). Vanguard noted that it began offering ESG funds to investors more than 20 years ago, beginning with the launch of the Vanguard FTSE Social Index Fund (VFTAX) in 2000.