Industry Updates

BlackRock to switch emerging market bond ETF to ESG index

The new index will underweight or exclude issuers with low ESG ratings

Lauren Gibbons


BlackRock will switch the index of its emerging markets bond ETF to apply an ESG screening filter to provide a “better proposition” for sustainable investors.

In a shareholder notice, BlackRock said the iShares J.P. Morgan $ EM Investment Grade Bond UCITS ETF (IGEM) will change its benchmark from the J.P. Morgan Emerging Markets Bond Global Diversified Investment Grade index to the J.P. Morgan ESG EMBI Global Diversified IG index.

As a result, the ETF will see its name change name will change to the iShares J.P. Morgan ESG $ EM Investment Grade Bond UCITS ETF (EMES).

The asset manager said the revisions will be “a better proposition for investors seeking a sustainable ESG investment solution”.

The changes will come into effect "on or around" 24 April.

The new benchmark comprises US dollar-denominated emerging market debt, both fixed and floating-rate, issued by sovereign and quasi-sovereign entities.

It excludes quasi-sovereign issuers that do not adhere to the United Nations Global Compact principles.

The United Nations Global Compact has 10 principles spanning areas such as human rights, labour, environment and anti-corruption.

The index will exclude issuers involved in controversial industries including weapons, oil sands, thermal coal and tobacco.

This index incorporates an ESG methodology to favour sovereign and quasi-sovereign issuers with higher ESG ratings.

Moreover, issuers with ESG ratings below a certain threshold set by the index provider will be either underweighted or removed from the index.

Earlier this month, a UK activist investor called for more oversight of BlackRock's approach to sustainable investing, with Larry Fink set to face a vote on his dual role as chairman and CEO.

Fink was previously called on to resign over the “hypocrisy” of his approach to ESG in 2022.

BlackRock said that Bluebell’s critique was misguided and rooted in disagreements over proxy voting decisions.

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