Industry Updates

BlackRock water, agribusiness and timber ETFs set for overhaul amid index consultations

S&P Dow Jones Indices is consulting on whether to broaden the indices

Jamie Gordon

a fish on a rock

BlackRock’s water, agribusiness and timber ETFs could be set for overhauls after S&P Dow Jones Indices launched consultations to change the underlying benchmarks.

The indices facing a revamp are the S&P Global Water index, the S&P Commodity Producers Agribusiness index and the S&P Timber and Forestry index.

The water benchmark is tracked by the $2.1bn iShares Global Water UCITS ETF (IH2O) and $292m iShares Global Water Index ETF (CWW), the agribusiness index underlies the $1bn iShares Agribusiness UCITS ETF (SPAG) and the timber index is followed by the $207m iShares Global Timber and Forestry UCITS ETF (WOOD) and $254m iShares Global Timber and Forestry ETF (WOOD).

SPDJI is proposing to increase the total market cap requirement for inclusion to $300m for all three benchmarks, up from $250m for water and timber and no current minimum for agribusiness.

The target constituent count on all three indices would also increase to 100, up from current targets of 50, 25 and 0 for water, timber and agribusiness, respectively.  

The index provider also wants to increase eligible minimum daily trading volume to $3m for new entrants and $2m for existing constituents, up from $1m and $500,000.

All three indices will also implement new constituent weighting methodology and scoring to measure companies’ exposure to the desired theme.

They will also carry out exclusions based on controversial business involvement, violations of the UN’s Global Compact and media and stakeholder analysis.

If approved, the above changes will be enacted on the indices’ next rebalance dates on 3 October for the timber and forestry index, 24 October for water and 19 December for agribusiness.

SPDJI also suggested adding companies listed in emerging markets to the water, timber and agribusiness benchmarks at their first rebalance dates in 2023.

The methodology shifts are a carbon copy of those implemented on BlackRock’s $6.8bn iShares Global Clean Energy UCITS ETF (INRG) and $5.7bn iShares Global Clean Energy ETF (ICLN), which underwent a forced makeover after facing liquidity issues and flows into the products began driving the performance of underlying stocks.

The first round of changes saw the ETFs shift from tracking the S&P Global Clean Energy Select index to the new rendition of the S&P Global Clean Energy index last March.

The rule changes have so far been successful in diversifying the underlying baskets, reducing their significant ownership of small companies and creating flexibility for assets to flow in and out without moving markets to the same extent as they did at the turn of 2020 to 2021.

In a document seen by ETF Stream, BlackRock said it would review the new proposals and respond to SPDJI accordingly.

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