RBC iShares, the brand name for the strategic alliance between RBC Global Asset Management (RBC GAM) and BlackRock Canada, has unveiled a sustainable core suite of funds with the launch of six new ETFs on Toronto Stock Exchange.

Doug Coulter, President, RBC GAM.

The range includes four equity and two fixed income ETFs which are designed to be used as the foundation blocks of investors’ portfolios.

Equity ESG

The equity ETFs track MSCI ESG Extended Focus indices and provide exposure to Canadian, US, international (EAFE), and emerging market stocks.

Each underlying reference is a variant of a core MSCI equity benchmark which also seeks to enhance the ESG characteristics of the parent index.

It does this by applying several levels of screening based on data from MSCI ESG Research.

First, the index methodology excludes any issuer deemed to be involved in severe ESG controversies. Second, firms associated with the production of firearms, controversial weapons, and tobacco are excluded. Finally, the remaining issuers are assigned an MSCI ESG rating based on an analysis of the issuer’s willingness and ability to deal with ESG risks occurring within its sector.

The indices then utilize an optimization weighting model that seeks to maximize the ESG profile of each index while adhering to constraints on the allowable tracking error of each index relative to its parent.

The ETFs, along with their expense ratios, are as follows:

iShares ESG MSCI Canada Index ETF (XESG CN); 0.20%
iShares ESG MSCI USA Index ETF (XSUS CN); 0.25%
iShares ESG MSCI EAFE Index ETF (XSEA CN); 0.30%
iShares ESG MSCI Emerging Markets Index ETF (XSEM CN); 0.35%

Fixed Income ESG

The fixed income ETFs include the iShares ESG Canadian Aggregate Bond Index ETF (XSAB CN) and the iShares ESG Canadian Short Term Bond Index ETF (XSTB CN), both of which provide exposure to Canadian government and corporate bonds with the latter fund targeting the shorter end of the yield curve (maturities less than five years).

The ETFs come with expense ratios of 0.18% and track investment grade bond indices created through a partnership between Bloomberg Barclays and MSCI. Each index follows a similar process to the equity funds, screening out companies involved in certain ‘unethical’ operations, before using an optimization process to enhance its ESG profile while maintaining similar risk characteristics to its parent index.

Doug Coulter, President, RBC GAM, commented, “The addition of the iShares Sustainable Core ETF suite to the RBC iShares platform brings an entirely new and innovative solution set for the growing number of Canadians looking to incorporate environmental, social, and governance factors into their portfolios. The RBC iShares strategic alliance was launched with the stated goal of bringing unparalleled choice and opportunities to Canadian ETF investors, and these new solutions reflect that commitment.”

Pat Chiefalo, Head of iShares, BlackRock Canada, added, “As the first solutions introduced under the RBC iShares alliance, it was important for us to bring a set of ETFs to market that would satisfy a growing need and have a real investor impact. We’re seeing the sustainable investing category rapidly growing, as investors evolve how they build their portfolios, increasingly placing a greater focus on solutions that allow them to align their beliefs with their investments. The iShares Sustainable Core ETFs empower investors to achieve both outcomes, in the same simple experience they have come to know with the iShares Core ETFs.”