ESG Bonds

USA

Nuveen goes for ESG bond fund, sort of

Nuveen has listed a new ESG bond ETF to add to its growing range of ESG funds, the ESG US Aggregate Bond ETF (NUBD). 

NUBD uses an interesting method. It starts with the MSCI US Aggregate ESG Select Index as its “base index”, according to its prospectus, and then selects debts from the base index that match its ESG criteria. 

Companies involved in “controversial businesses” are excluded under its ESG rules. Controversial businesses include the usual suspects like tobacco and weapons, but also less controversial ones like alcohol and nuclear power. Companies that fail to publish ESG information are also ruled out. 

Beyond these exclusions, NUBD’s ESG criteria is unspecific, ranging from how companies treat their employees, to their natural resource use, to their “governance practices and business ethics.” The prospectus does not say whose data will be used to assess ESG performance.

Curiously, mortgage-backed and asset-backed securities get special treatment. They can be plucked up “without reference to ESG criteria,” the prospectus says.