SSGA launches ESG muni bond ETF | ETF Strategy


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State Street Global Advisors expanded its range of municipal bond ETFs launched in partnership with Nuveanan operating division of TIAA Global Asset Management.

Brie Williams, Head of Practice Management at State Street Global Advisors.

Active management SPDR Nuveen Municipal Bond ESG ETF (MBNE USA) provides exposure to municipal issuers demonstrating strong environmental stewardship, strong governance and positive social impact.

The fund is listed on Cboe BZX Exchange and came to market with $30 million in assets.

The ETF is overseen by Nuveen’s portfolio managers, Tim Ryan, Managing Director; Shawn O’Leary, Senior Vice President; and David Blair, Managing Director, who collectively bring over 70 years of experience investing in the municipal bond market.

The fund managers select securities primarily from a universe of securities represented by the constituents of the Bloomberg Barclays 3-15 Year Blend Municipal Bond Index (2-17)an index composed of high quality municipal securities ranging from 2 to 17 years to maturity.

The index covers a wide range of municipal securities, including state and local general bond bonds, revenue bonds, prepaid bonds, insured bonds and municipal lease bonds.

While the fund is meant to invest primarily in high quality credits, up to 20% of the portfolio may be allocated to bonds rated below BBB+. This includes junk bonds as well as securities rated in the “lower middle category” of the investment grade universe.

Nuveen leverages proprietary ESG analysis to assess the extent to which a municipal issuer is aligned with the United Nations Sustainable Development Goals, a set of goals established by the United Nations that aim to address a range of global challenges including poverty, inequality, climate change, environmental degradation, peace. , and righteousness. Nuveen’s framework assigns each issuer a rating between one and five.

Generally, only bonds from issuers with a rating of three or better will be eligible for inclusion in the ETF’s portfolio, although up to 20% of the fund’s assets may be allocated to bonds from non-standard issuers. rated or issuers with a rating of less than three if the proceeds of these bonds have been certified specifically for projects with a positive social impact.

When selecting individual securities, Nuveen employs a rules-based, value-oriented strategy designed to identify higher-yielding, undervalued municipal bonds that offer above-average total return potential. The approach combines top-down advice on duration, sector and credit quality provided by Nuveen’s Investment Committee with in-depth credit research.

The fund targets a weighted average duration between 4.5 and 7 years and a weighted average maturity between 5 and 12 years. Individual stocks and municipal sectors are limited to deviations of 5% and 10%, respectively, from their weights in the benchmark.

The ETF comes with an expense ratio of 0.43%, slightly higher than the SPDR Nuveen Municipal Bond ETF (MBND USA) which costs 0.40% and follows the same screening approach as described above but does not incorporate Nuveen’s ESG framework.

SSGA offers three other muni bond ETFs in partnership with Nuveen. the SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF (SHM US), SPDR Nuveen Bloomberg Barclays Municipal Bond ETF (TFI USA)and SPDR Nuveen Bloomberg Barclays High Yield Municipal Bond ETF (HYMB US) are passively managed, tracking indices targeting the short-term, broad-dated and high-yield segments of the muni market. Collectively, the five ETFs house nearly $12 billion in assets.

Brie Williams, head of practice management at State Street Global Advisors, said: “The prospect of higher taxes coupled with growing uncertainty surrounding future interest rate hikes has increased demand for ETFs. of actively managed municipal bonds. At the same time, demand for municipal bond exposure is growing, investors are increasingly looking beyond equities for ESG exposure, which is why we are excited about the expansion of our municipal bond range. SPDR ETF and the partnership we have built with Nuveen. ”

Tim Ryan, Portfolio Manager at Nuveen, added, “As investors become more familiar with integrated ESG strategies, Nuveen has created a proprietary framework designed to identify municipal bond issuers that support income generation for investors. and achieve positive ESG results in their communities. The fund is also designed to provide exposure to bonds whose proceeds are used for positive environmental or social projects addressing critical issues such as climate change, environmental degradation, inequality, poverty and justice and are aligned with the United Nations Sustainable Development Goals.


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