BlackRock has launched a new sustainable smart beta ETF in Europe providing ESG-integrated exposure to a global portfolio of high-quality stocks.
BlackRock has launched a new ESG-tailored smart beta ETF in Europe.
The iShares MSCI World Quality Factor ESG UCITS ETF (IWQE) has been listed on Euronext Amsterdam and SIX Swiss Exchange in US dollars.
The fund is linked to the MSCI World Quality ESG Reduced Carbon Target Select Index which is constructed from the parent MSCI World universe of large and mid-cap stocks from 23 developed market countries worldwide.
The methodology first excludes violators of UN Global Compact principles, companies embroiled in severe ESG-related controversies, and firms with business operations linked to controversial and nuclear weapons, civilian firearms, tobacco, thermal coal, and oil sands.
The index then selects and weights its constituents using an optimization process that aims to maximize exposure to the quality factor (based on high return on equity, stable year-over-year earnings growth, and low financial leverage) while simultaneously boosting the overall ESG profile and satisfying constraints linked to diversification.
The ESG-related objectives include increasing the index’s overall industry-adjusted ESG score by at least 20% and reducing both total carbon emissions (based on Scope 1 and Scope 2 emissions) and potential carbon emissions (based on fossil fuel reserves) by 30%.
The diversification constraints include a minimum selection of 100 stocks, capping deviations in country or sector weights relative to the parent universe at 5%, capping the weight of any single stock at the lower of 2% above its weight in the parent index or ten times its weight in the parent index, and limiting the ex-ante tracking error relative to the parent index to no more than 5%.
As of the end of April, the index contained 142 constituents compared to 1,507 for the parent universe.
US-listed stocks accounted for just under a third (63.0%) of the index weight with the next-largest country exposures being Switzerland (7.6%), the UK (6.2%), France (4.1%), and Denmark (3.0%).
Information technology stocks made up more than a quarter (27.0%) of the sector allocation followed by health care (14.2%), consumer staples (12.7%), financials (12.5%), and industrials (10.6%).
Notable positions included Microsoft (6.3%), Novo Nordisk (3.0%), Apple (2.9%), Visa (2.7%), and Nestle (2.7%).
The ETF comes with an expense ratio of 0.30% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR)