Green bonds ETFs: why put them in your portfolio

Greenbond ETFs combine the advantages of green bonds and ETFs (obviously): economy, liquidity and diversification. Sustainable investments will become increasingly important and profitable, so it is better to put them in the portfolio.

green bonds ETFs

Sustainable investments are the future. Sensitivity to the environment is growing and savers are increasing who choose to invest in sustainable finance and ESG investments because they have understood that there is a double advantage: for the planet and for the portfolio.

For the portfolio: experience and authoritative research have shown that portfolios invested in ESG companies (that have good governance and operate with respect for the environment and human rights), perform better in the long term.

The performance of ESG investments is very good

It has been shown that if 50% of the less virtuous companies (those with low Esg – Environmental Social Governance scores) are excluded from a European equity portfolio, that is those companies that do not have good governance, do not respect the environment nor human rights, risk-adjusted returns that are higher than those of the traditional index.

An example: if 12 years ago a saver had invested in a traditional European equity index, such as MSCI Europe, his capital would have increased by 3.63% on average per year, while if he had invested in 50% of companies of the same index, selected among those with the best Esg profile, the average annual profit would have been 4.42%.

msci green bond index

The advantages of green bonds ETFs

As regards investments in bonds, it has been shown that the strong expansion of the green bond market (bonds issued to finance environmental projects) has led to significant savings in CO2 (carbon monoxide) and the return for the investor is exactly the same as classic bonds. Green bonds are, to all intents and purposes, bonds with a rating, maturity and coupons.

But 100 is more than one: and then, instead of a single bond, you can choose an green bond ETF that replicates indices made up of only green bonds, with the typical advantages of ETFs (Exchange Traded Funds):

  • maximum diversification
  • cost-effectiveness, because an ETF costs a hundred euros, compared to the thousand euros required for a bond
  • liquidity, because the ETF is listed on the stock exchange and can be easily traded on the same day

Green bonds ETFs are bought and sold, like stocks, on the stock exchange during trading sessions.

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