Industry Updates

BlackRock SRI ETF range sees methodology overhaul

Remaining ETFs will now be fully replicating

Lauren Gibbons

ESG globe world

BlackRock’s SRI ETF range will undergo several methodology changes in a bid to make the sector composition more tightly aligned with the parent index.

The seven-strong range – which includes the $10bn iShares MSCI World SRI UCITS ETF (SUSW) and the $7bn iShares MSCI USA SRI UCITS ETF (SUAS) – will see the weight of each issuer capped at the same weight in the parent index, with scope to go 3% above this weighting. The maximum issuer weight is capped at 18%.

In addition, sector weights must follow a maximum fluctuation of 1% from the parent index's weight.

A spokesperson from BlackRock said: “The methodology changes are designed to…reduce sector deviation versus the parent index whilst maintaining the overall sustainable characteristics of the methodology.

“Additionally, enhancements to the security selection process make sure the highest sustainable performers are always selected while also simplifying the methodology and maintaining sector diversification.”

Other changes include the addition of securities with an ESG score of 10, even if they exceed 25% of their sector's coverage target.

Concurrently, BlackRock is set to replicate the underlying index of three ETFs in the range – the iShares MSCI Europe SRI UCITS ETF (IESG), the iShares MSCI EMU SRI UCITS ETF (SMUA) and the iShares MSCI EM SRI UCITS ETF (SUSM) – taking the whole of its SRI range to fully replicating, effective 3 June.

A full replication strategy means IESG, SMUA and SUSM will track all the securities in the index.

BlackRock also recently fully replicated its $617m emerging markets dividend ETF in March following changes to the index’s methodology.

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