BlackRock has launched a new socially responsible equity ETF targeting UK-listed companies with strong environmental, social, and governance (ESG) characteristics.
Several ETF providers have listed socially responsible UK equity ETFs in recent months.
The iShares MSCI UK IMI ESG Leaders UCITS ETF (UKEL LN) has listed on London Stock Exchange and comes with an expense ratio of 0.15%.
Income is distributed on a semi-annual basis.
The fund is linked to the MSCI UK IMI Country ESG Leaders 5% Issuer Capped Index which selects its constituents from the parent MSCI UK IMI Index, a broad market index covering 99% of the UK’s total market capitalization.
Companies with business activities in alcohol, gambling, tobacco, nuclear power, and weapons, as well as those embroiled in severe ESG-related controversies, are excluded.
The remaining firms are then assigned an overall company ESG rating based on research from MSCI’s ESG research division. The rating – one of seven grades from ‘AAA’ to ‘CCC’ – indicates how well each firm manages key ESG issues relative to industry peers.
The index utilizes MSCI’s ‘ESG Leaders’ approach which selects the securities with the highest ESG scores while targeting a 50% sector representation versus the parent MSCI UK IMI Index. Firms with ratings below BB (lower-average) are not eligible for inclusion.
Constituents are weighted by float-adjusted market capitalization subject to a single company cap of 5%. The index is reconstituted annually in May and rebalanced on a quarterly basis.
The index exhibits a similar sector profile compared to its parent universe. The largest weights are allocated to financials (24.1%), consumer staples (15.8%), industrials (15.4%), consumer discretionary (11.6%), and communication services (9.0%).
The largest single stock positions are Unilever (7.9%), Prudential (4.6%), Vodafone (4.1%), RELX (4.1%), and London Stock Exchange (3.8%).
Fellow issuers HSBC and DWS have also introduced socially responsible UK equity ETFs in recent months.
The HSBC UK Sustainable Equity UCITS ETF (HSUK LN) was launched in October 2020. It tracks the FTSE UK ESG Low Carbon Select Index which references a portfolio of primarily large-cap stocks that have been adjudged to exhibit a low carbon footprint and a favourable ESG profile. It comes with an expense ratio of 0.12%.
DWS introduced its Xtrackers MSCI UK ESG UCITS ETF (XASX LN) in December. This fund was brought about via the reorganisation and rebranding of its FTSE All-Share-linked product. This fund, which costs 0.18%, tracks the MSCI United Kingdom IMI Low Carbon SRI Leaders Select Index which combines MSCI’s ‘ESG Leaders’ approach with a focus on low carbon companies