The ETF invests in investment grade municipal debt securities issued for sustainable projects.

VanEck announced September 10 the launch of its VanEck HIP Sustainable Muni ETF (CBOE: SMI). The ETF invests in investment grade municipal debt securities that have been issued to fund operations or projects that support or advance sustainable development, as well as promote positive social and environmental outcomes. Its objective is to generate current income generally exempt from federal income tax. (BusinessWire)

The first-of-its-kind, actively managed fund seeks to address the rising investor interest in fixed income investments that have a sustainable skew. With munis offering tax-free income, investors are seeking the best of both worlds, particularly now that higher taxes may be round the corner.

The ETF is issued in collaboration with independent research firm HIP Investor. HIP has ratings for 120,000 bonds on “human impact and profit” potential.

SMI is an actively managed strategy focusing on investment-grade state and local government debt that funds projects promoting sustainable development, including affordable housing, green spaces and hospitals.

VanEck HIP Sustainable Muni ETF (CBOE: SMI)

“We’re seeing investor interest in municipal bonds hitting levels not seen since the early 1990s, along with a concurrent increase in focus around sustainable investing approaches, especially in the fixed income marketplace,” said Jim Colby, Portfolio Manager with VanEck.

“SMI offers investors a core portfolio tool that hones in on those municipal debt securities that are facilitating projects with sustainable and positive impact. We’re excited to be launching this unique sustainability-focused muni ETF using HIP Investor’s data and ratings, and to be providing a new strategy for those looking for impactful exposure in the tax-exempt fixed-income sleeve of their portfolios.”

Screening the munis

Bonds are screened under the SMI strategy for the four attributes of climate threat resilience; proximity to opportunity zones, which are typically home to lower-income and racially diverse populations; ESG ratings; and the UN’s SDGs 9, 11 and 12.

“We believe combining active management with the robust analytical data on sustainability provided by HIP results in a compelling, first-to-market municipal bond ETF1. SMI is a welcome addition to our established lineup of seven municipal bond ETFs with currently over $7 billion in combined AUM as of July 31, 2021,” added Colby.

Colby will also function as the portfolio manager of the new strategy.

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