Industry Updates

BlackRock paves the path for improving ESG transparency

George Geddes

a dirt path through a forest

Asset management giant BlackRock has taken another step towards mainstreaming sustainable investing with the launch of six new Environment, Social and Governance (ESG) ETFs. Additionally, the firm has developed its ESG data reporting for all iShares' products on its website.

Partnering with MSCI once again, the six newly launched ETFs have joined iShares' Sustainable Core range. The new products enable investors to improve the ESG scores of their portfolios, reducing carbon and other Green House Gas (GHG) intensity, whilst maintaining the same performance as the recognised benchmarks.

The six ESG ETFs include:

EEUS (Acc)

EEUA (Acc)

EEUM (Acc)

EEWA (Acc)

EEJA (Acc)

EEEM (Acc)

ETFTickerTERiShares MSCI USA ESG Enhanced UCITS ETFEEDS (Dist)0.10%iShares MSCI Europe ESG Enhanced UCITS ETFEEUD (Dist)0.15%iShares MSCI EMU ESG Enhanced UCITS ETFEMUD (Dist)0.15%iShares MSCI World ESG Enhanced UCITS ETFEEWD (Dist)0.20%iShares MSCI Japan ESG Enhanced UCITS ETFEEJD (Dist)0.20%iShares MSCI EM ESG Enhanced UCITS ETFEEDM (Dist)0.23%

Across the six regions, the structure of the ETFs includes the commonly used ESG screener which removes constituents of the underlying index with exposure to nuclear weapons, tobacco, oil and gas, to name a few, as well as reducing emissions intensity by 30%. BlackRock uses an "avoid and advance" methodology which means avoiding any company associated with objectionable activities and advancing on companies based on their ESG scores, focusing on E, S or G in particular and targeting non-financial outcomes whilst still offering a return.

Stephen Cohen, Head of iShares EMEA at BlackRock, said in a statement: "The way portfolios are built in Europe is undergoing an upheaval, with investors demanding more when it comes to transparency, value and choice."

At a roundtable breakfast this morning at BlackRock's London offices, a panel took place to discuss the demand for sustainable investment products. The discussions included how Europe is setting the pace for sustainable investing and is predicted to grow twenty times over the next decade to $250bn in ESG ETF assets. Assets have nearly doubled in Europe over the last 15 months, from $2.8bn at the end of 2017, to $5bn in February 2019, said Carolyn Weinberg, Managing Director at BlackRock.

In tandem with a growing demand in ESG products comes a growing demand for transparency. That is why BlackRock has developed its data offering to include ESG scoring for all of it iShares products. This includes data points such as carbon intensity and business involvement exposure.

Using the iShares Core MSCI EM IMI UCITS ETF (EIMI) as an example, below are the statistics now available on the iShares' product page:

graphical user interface, text, application, email

Source: iShares

EIMI has an ESG quality score of only 4.3. This is due to its constituents being exposed to cluster munitions, landmines, tobacco and failing UN Global compact. This can all be seen in the "Business development" section.

Just under half of investors say they could use more information when it comes to implementing ESG in to their portfolios, according to recent Greenwich survey.

With this being the first ESG data offering of its kind, BlackRock hopes this will encourage other ETF issuers and data providers to follow suit and improve the global transparency to sustainable investing, says Weinberg.

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