Betashares unveils Aussie ETF with ESG bona fides

Exchange Traded Fund (ETF) specialist Betashares has launched its first ETF fully invested in a universe of ethically screened Australian bonds.

The newly released Ethical Australian Composite Bond (AEBD) fund invests in a “diversified portfolio of high-quality Australian corporate and government bonds” screened by Betashares’ Responsible Investment Committee (RIC), which comprises representatives with experience and expertise in ethical investing.

The screening effectively excludes issuers (other than sovereign bond issuers) with material exposure to fossil fuels or those engaged in activities considered inconsistent with Betashares’ responsible investment criteria.

“AEBD represents a breakthrough in ethical Australian fixed income investing by aiming to track an index that combines robust environmental, social and governance (ESG) screens with an intelligent investment strategy that weights bonds on their risk-adjusted income potential, rather than adopting a debt-weighted indexing approach,” Betashares writes in a statement.

“This strategy seeks to provide higher returns compared to standard fixed income benchmarks, such as the AusBond Composite Index, appealing to both values-driven investors and those seeking strong financial performance.”

The fund aims to track the Bloomberg Australian Enhanced Yield Ethically Screened Composite Bond Index. Over the previous 12 months, investors in funds following the index have seen 7.1% returns, and 2.99% since inception (backfilled to 2011).

Betashares chief executive Alex Vynokur said the AEBD would serve as a “core portfolio building block for ethically minded Australian [bond] investors and their advisers”.

He added: “Our commitment to delivering ETFs that meet the dual goals of delivering financial returns and meeting responsible investment considerations continues to drive our passion for innovation within this investment category.

“We believe AEBD will become a foundational element in the portfolios of many ethically minded Australian investors,” Vynokur said.

The launch of AEBD comes at a time of ongoing interest in fixed income, according to Betashares.

“Over the past two years, global interest rate hikes have placed fixed income in the spotlight, with Australian fixed income ETFs capturing over $10.3 billion in net inflows since October 2022.”

Betashares boasts it is the largest provider of fixed income ETFs in Australia, receiving over 35% of these inflows.