BlackRock has launched a sustainable bond exchange-traded fund in response to growing demand for investments that incorporate environmental, social and governance (ESG) factors. The fund is an extension of the firm’s ESG and impact product set that includes active funds, index funds and ETFs.
Assets in sustainable investing grew 61% globally from 2012 to 2014 to USD$21.4 trillion. Using ETFs can be a transparent and cost-effective way to build ESG-driven portfolios.
The iShares Euro Corporate Bond Sustainability Screened 0-3yr UCITS ETF (SUSE) tracks the Barclays MSCI Euro Corporate 0-3 year Sustainability ex-Controversial Weapons Index, which includes short-term Euro-denominated investment grade bonds issued by corporates with an ESG rating of BBB or above, as determined by MSCI. Companies are rated on 37 different ESG factors including carbon emissions. Additionally, the index excludes debt from companies that are involved with controversial weapons, including cluster bombs, land mines and chemical and biological weapons. Bonds included in the index are issued by corporates from across Europe, the Americas and Asia Pacific.
Hannah Skeates, iShares Global Head of Sustainable Investments at BlackRock, commented: “Sustainable investing is going mainstream and it is no longer a niche pursuit. Investors are placing greater emphasis on transparency and the ESG practices of companies, regardless of whether they are investing in the company’s equity or debt. ETFs are one of the investment products of choice because they are easy to use and investors can see the process and methodology in selecting social and environmental characteristics, all implemented in a single trade.
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“This is our first move into sustainable bond ETFs. It complements our European-domiciled sustainable equity ETFs, which has amassed almost USD$500m. Combined with the active and index funds within the BlackRock range, investors now have more choice for expressing their traditional investment views whilst taking into account the impacts of investment choices.”
This fund is physically-replicating and has a total expense ratio of 0.25%.
BlackRock currently manages more than USD$200 billion of assets across ESG screened and impact funds globally. iShares, BlackRock’s ETF business, is a global leader in sustainable ETF investing, and offers a range of developed and emerging equity, as well as corporate bond ETFs.