BlackRock adds global equity ETF to iShares ESG suite

Oct 17th, 2017 | By | Category: Equities

BlackRock has expanded its range of environmental, social and governance (ESG) ETFs with the launch of the iShares MSCI World SRI UCITS ETF (SUSW) on the London Stock Exchange. SUSW enhances exposure to equities with outstanding ESG ratings from developed markets, and will exclude companies with negative social or environmental impacts.

Manuela Sperandeo, head of specialist sales, EMEA at BlackRock

Manuela Sperandeo, head of specialist sales, EMEA at BlackRock

Manuela Sperandeo, head of specialist sales, EMEA, BlackRock, commented: “We consistently hear from our clients that they are looking more closely at improving the ESG and carbon profile of their investments, which they acknowledge helps manage risk in their portfolios.”

The ETF will track the MSCI SRI World Index. MSCI ESG ratings assess how companies are exposed to and manage idiosyncratic risks such as strikes, factory shutdowns, lawsuits, as well as broader industry issues that can create both significant risks and opportunities such as regulation and weather patterns.

The index also excludes companies involved in severe controversies or in military weapons, civilian firearms, tobacco, alcohol, nuclear power, gambling, adult entertainment and genetically modified organisms.

Deborah Yang, managing director and head of MSCI index in EMEA, commented: “We are excited that the MSCI World SRI Index will be used for the new iShares ETF. MSCI is a leader in ESG indices, and the index is backed by high-quality MSCI ESG Ratings and data. Over recent years we have seen a substantial increase in demand from investors to incorporate values and ESG principles into their investment processes, and we currently have more than $62 billion globally in assets benchmarked to MSCI ESG indices.”

As of 29 September, the index has 399 holdings compared to the MSCI World Index’s 1,652. The country exposures of the MSCI SRI World are broadly in line with its parent benchmark – the USA is the largest exposure with 54.3% of the weight (58.9% in the MSCI World), followed by 8.1% for Japan (8.6%) and 5.7% for France (4.0%).

The sector breakdown shows that information technology is the largest sector exposure in the MSCI SRI World with 17.5% of the weight (16.2% in the MSCI World), followed by financials with 17.2% (18.2%) and consumer discretionary with 12.3% (12.1%).

The largest constituents in the MSCI SRI Index are Microsoft (5.7%), Procter & Gamble (2.4%) and Roche (1.9%), while the MSCI World’s largest constituents are Apple (2.1%), Microsoft (1.4%) and Facebook (1.1%).

Sperandeo added: “This ETF is the latest addition to a range that allows investors to express their active investment decisions on a broad range of markets and geographies, quickly and cost-effectively. Importantly, the SRI index tracked by this ETF has also outperformed its parent index since inception with comparable volatility, which means investors would not have forfeited returns.”

The MSCI World SRI has returned 5.2% per annum over the past ten years, with an annualized standard deviation of 16.2%. This compares favourably to the performance of the MSCI World Index which has returned 4.8% per annum with an annualized standard deviation of 16.4%. Year-to-date, the SRI index is up 17.0% compared to 16.5% for the MSCI World.

SUSW is listed in euros and accumulates income. There is a version listed in dollars that distributes income under the ticker symbol SUWS. The fund has a total expense ratio of 0.30%.

BlackRock already offers an ETF that tracks the MSCI World Index, the iShares Core MSCI World UCITS ETF (LON: SWDA), launched in September 2009. The ETF currently has $12bn in assets and has a TER of 0.20%.

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