iShares Paris-Aligned Climate MSCI USA ETF (PABU US) – Portfolio Construction Methodology

The underlying MSCI USA Climate Paris Aligned Benchmark Extended Select Index targets the MSCI USA universe while meeting EU Paris-Aligned Benchmark design. An optimizer selects and weights securities to minimize tracking error to the parent while achieving: at least a 50% reduction in greenhouse-gas intensity and potential emissions intensity versus the parent; a self-decarbonization trajectory of 7% per year (implemented as 10% every SAIR); neutral active weight in high climate-impact sectors; ≥20% higher aggregate weight in companies setting science-based targets; ≥50% reduction in physical-risk Climate VaR; ≥4× ratio of green to fossil-fuel-based revenue and ≥100% uplift in green revenue; index ITR ≤2.0°C with cumulative projected emissions aligned to ≤1.5°C. Diversification constraints include single-name active weight ±2%, minimum weight 0.01%, security weight ≤20× parent, and active sector/country bands of ±5%, with a 5% one-way turnover cap. Rebalanced at the May and November reviews.

To explore PABU in more depth, visit our ETF analytics platform for institutional-grade insights — including performance and risk metrics, correlations, sensitivities, and factor exposure: https://www.etfstrategy.com/etf/PABU_US