BlackRock has unveiled a new suite of sustainability-focused equity ETFs on London Stock Exchange and Xetra.
Stephen Cohen, Head of iShares EMEA at BlackRock.
The suite of six ETFs offers global, US, Japan, European, eurozone, and emerging markets exposure and is aimed at the growing number of investors seeking to align their moral values with long-term investment objectives.
The funds, which track ESG-screened versions of some of MSCI’s best known single-country and regional indices, are being marketed as part of BlackRock’s ‘Core‘ ETF range – low-cost funds designed as primary building blocks for investors’ portfolios.
The new ETFs, which are available in both accumulating and distributing share classes, further complement the firm’s existing 15-strong range of ESG UCITS ETFs.
ESG ETF assets under management is expected to rise dramatically in the next decade driven by strong demand from both retail and institutional investors, according to analysis conducted by the asset manager. The firm predicts assets are expected to grow from $25 billion today to more than $400bn by 2028, increasing the ETF share of total ESG fund assets from 3% to 21%.
Philipp Hildebrand, Vice Chairman of BlackRock, commented, “It is clear that there is a growing movement of investors who want to align their investment decisions with their values and beliefs. Increased transparency on the sustainability profile of their investment portfolios will enable investors to understand the potential ESG-related risks and opportunities they are exposed to. Strong ESG performers are more resilient and this has led to an irreversible move from an era of asking “why?” to “why not?” in sustainable investing.”
Stephen Cohen, Head of iShares EMEA at BlackRock, added, “A greater focus on value for money and the availability of better technology and tools is empowering European investors to evolve how they build portfolios to achieve intended outcomes. With the iShares Sustainable Core suite, sustainable investing is now as easy as ‘traditional’ investing. Just as iShares Core ETFs have dramatically simplified the investor experience, we believe this complementary range will play a key role in bringing sustainable investing to the heart of investor portfolios.”
Baer Pettit, President at MSCI, said, “We are observing a growing demand amongst asset owners and wealth managers for exclusions based on environmental, social and governance criteria that will enable them to efficiently manage their investment portfolios. This launch underpins MSCI’s commitment to monitor the evolving ESG landscape and to provide innovative indexes that are designed to help investors address their needs as trends develop. In this instance, MSCI has created an off-the-shelf index with ESG screens that is easy for our client’s to use and implement.”
Each underlying MSCI ESG index screens its parent index, removing companies involved in the production of controversial weapons, nuclear weapons, civilian firearms, and tobacco as well as firms operating in the thermal coal or oil sands industries. Any entity deemed in violation of the United Nations Global Compact principles is also excluded from selection. The remaining constituents are then weighted by free-float market capitalization.
The ETFs and their total expense ratios (TERs) are as follows:
iShares MSCI World ESG Screened UCITS ETF (SAWD LN); 0.20%
iShares MSCI Japan ESG Screened UCITS ETF (SAJP LN); 0.20%
iShares MSCI Emerging Markets IMI ESG Screened UCITS ETF (SAEM LN); 0.18%
iShares MSCI Europe ESG Screened UCITS ETF (SAEU LN); 0.12%
iShares MSCI EMU ESG Screened UCITS ETF (SAUM LN); 0.12%
iShares MSCI USA ESG Screened UCITS ETF (SASU LN); 0.07%
The new ETFs undercut similar products from UBS and Lyxor, two other leading ESG ETF providers in Europe.
UBS offers a range of funds targeting global, US, Japan, UK, eurozone, Asia Pacific and emerging markets equities and are also linked to MSCI indices. The UBS funds screen out the usual suspects but go a step further, selecting only the top quarter (approximately) of constituents ranked by MSCI’s proprietary ESG scoring for inclusion. These funds range in price from 0.25% to 0.50%.
Lyxor’s suite of ESG ETFs are based on MSCI’s ‘Trend Leaders’ indices and provide exposure to global, US, eurozone, and emerging markets stocks. Each index targets firms that have a robust ESG profile as well as a positive trend in improving that profile. The funds come with TERs ranging from 0.20% and 0.30%.
New ESG capabilities
BlackRock has also announced the introduction of five strategic ESG model portfolios and enhanced data tools providing additional ESG insights across its 30-strong suite of core ETFs. The model portfolios are aimed at financial advisers and independent asset managers, and offering a range of risk profiles.