ESG Criticism Seen Benefiting Bonds

Broadly speaking, equity-based strategies fueled the initial boom in environmental, social, and governance exchange traded fund proliferation. As a result, criticism lobbed at ESG investing has focused on equity-based ESG funds.

In what could be good news for funds such as the Calvert Ultra-Short Investment Grade ETF (CVSB), bond issuers are paying attention to the vitriol aimed at the ESG/equity combination and are looking to avoid a similar fate.

One way of looking at that is the ESG bond market is maturing. In the process, it’s looking to avoid some of the hoopla that recently plagued market stock-based ESG ETF expansion. That could prove wise at a time when investors and regulators are applying more scrutiny to the ESG label.

CVSB Right Bond ETF at the Right Time

In addition to signs the market is maturing, criticism aimed at comparable equity strategies is paying off in another way. Debt issuers are being more thorough in evaluating whether or not upcoming issues can credibly be deemed ESG.

That’s meaningful to investors considering CVSB because the Calvert ETF allocates more than 61% of its roster to investment-grade corporate debt. Whether it’s junk bonds or investment-grade credit, corporate issuers are very scrutinized when it comes to ESG claims. That is to say, in this environment, they need to ensure there’s substance to those claims.