The Betashares Ethical Australian Composite Bond ETF (ASX: AEBD) provides exposure to a diversified portfolio of high-quality Australian corporate and government bonds. Bonds are screened to exclude issuers, other than sovereign bond issuers, with significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investment considerations.

The fund marks the latest addition to Betashares’ range of ethical and responsible investment ETFs, which include nine funds and a total of $5.6 billion in assets under management at the end of September 2024.

According to the fund manager, AEBD represents a “breakthrough” in ethical Australian fixed income investing amid growing appetite for the asset class among investors and financial advisers.

Australian fixed income ETFs have seen more than $10.3 billion in net inflows since October as global interest rate hikes over the past two years have shifted focus to fixed income.

Investor interest is expected to intensify further as inflation continues to slow and major central banks begin to cut interest rates, Betashares noted.

“AEBD represents an essential portfolio building block for ethically minded Australian investors and their advisors seeking intelligent fixed income allocations that reflect responsible investment principles,” said Betashares CEO Alex Winokur.

“We are proud to leverage our market leadership in both ethical and fixed income ETFs to offer a unique portfolio solution that meets the evolving preferences of advisors and investors alike.”

AEBD aims to track an index that combines robust ESG screens with a smart investment strategy that weights bonds based on their risk-adjusted income potential, rather than adopting a debt-weighted indexing approach.

This strategy, according to Betashares, seeks to deliver higher returns than standard fixed income benchmarks such as the AusBond Composite Index.

Vinokur also reaffirmed Betashares’ commitment to providing ETFs that meet the dual goals of providing financial returns and meeting responsible investment considerations.

In 2017 Betashares was the first ETF provider to announce offerings that combine a wide range of ethical eligibility screens for international and Australian equities with its Global Sustainability Leaders ETF (ASX: ETHI) and Australian Sustainability Leaders ETF (ASX: FAIR) respectively.

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