Industry Updates

BlackRock sector ETFs fail to get shareholder consent for ESG index switch

Two consumer ETF index changes fail to get the required shareholder approval

Theo Andrew

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Two BlackRock sector ETFs that were set to switch to ESG indices failed to get the required shareholder approval to do so, the group has said.

Following an extraordinary general meeting (EGM) last week, shareholders voted not to add reduced carbon and ESG screens to indices of the $46.7m iShares MSCI World Consumer Staples Sector UCITS ETF (WCSS) and the $22.7m iShares MSCI World Consumer Discretionary Sector UCITS ETF (WCDS).

The remaining three ETFs in the range, the iShares MSCI World Health Care Sector UCITS ETF (WHCS) the iShares World Financial Sector UCITS ETF (WFNS), the iShares MSCI World Information Technology Sector UCITS ETF (WITS) will see the new screens added.

ETF Stream understands the shareholder vote was “inconclusive” as the minimum number of shareholder voters required was not met.

In a market note, BlackRock said: “The company announces that the EGM held at 9.30am on 11 February 2022 failed to pass as a quorum was not able to be met.

“The fund will therefore not undergo these proposed changes. The company will take action in order to seek to understand the reasons behind the result of the EGM.”

BlackRock added it would now take some time to consider the next steps for the two ETFs, which would have been classified as Article 8 under the Sustainable Finance Disclosure Regulation (SFDR) following the changes.

Are investors being left behind in the ESG index switching frenzy?

The world’s largest asset manager had announced plans to switch the range of five ETFs in January after its directors said the new benchmark index would represent a “better proposition for investors seeking a sustainable ESG investment solution”.

Following the change, WCSS and WCDS would have seen ESG added to their names while the tracking error of the new indices was expected to rise from 0.20% to 0.25%.

This is still expected to be the case for the other three ETFs which collectively house 90% of the range’s assets under management.

WCDS would have gone from tracking the MSCI World Consumer Discretionary index to the MSCI World Consumer Discretionary ESG Reduced Carbon Select 20 35 Capped index.

Meanwhile, WCSS would have switched from the MSCI World Consumer Staples index to the MSCI World Consumer Staples ESG Reduced Carbon Select 20 35 Capped index.

Both ETFs launched in 2019 and were initially listed on the Deutsche Boerse and Euronext Amsterdam exchanges.

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