BlackRock is set to switch five sector ETFs to indices that implement reduced carbon and ESG metrics.
Reduced carbon and ESG screens will be added to the parent index of the five ETFs which BlackRock said will represent a “better proposition for investors seeking a sustainable investment solution”.
In the largest of the switches, the $432m iShares MSCI World Health Care Sector UCITS ETF (WHCS) will go from tracking the MSCI World Health Care Index to the MSCI World Health Care ESG Reduced Carbon Select 20 35 Capped index.
As a result, WHCS will see its name changed to iShares MSCI World Health Care Sector ESG UCITS ETF – under the same ticker – and will be classified as Article 8 under the Sustainable Finance Disclosure Regulations (SFDR).
WHCS will go from tracking 170 stocks in the parent index to 153 under the proposed benchmark.
The remaining four ETFs, the iShares World Financial Sector UCITS ETF (WFNS), the iShares MSCI World Information Technology Sector UCITS ETF (WITS), the iShares MSCI World Consumer Staples Sector UCITS ETF (WCSS) and the iShares MSCI World Consumer Discretionary Sector UCITS ETF (WCDS), will undergo similar changes, with the same reduced carbon filter added to their indices.
As a result, all the ETFs will have ESG added to their name, remaining under the same ticker and total expense ratio (TER) of 0.25%.
While no increase in cost, BlackRock said it expects the tracking error of the new indices to rise from 0.20% to 0.25% for all five ETFs.
The new benchmark methodology will exclude issuers involved in controversial weapons, nuclear weapons, civilian firearms, tobacco, thermal coal, oil sands, conventional weapons and companies that are classified as violating United Nations Global Compact principles.
In a shareholder notice, BlackRock said: “The rationale for the change is that the directors are of the view that the new benchmark index methodology represents a better proposition for investors seeking a sustainable ESG investment solution.”
Four of the five ETFs were launched in 2019, initially listed on the Deutsche Boerse and Euronext Amsterdam exchanges, while (WFNS) was launched in May last year.
Shareholders will vote on the changes in an extraordinary general meeting on 4 February and if approved, will likely take effect on 1 March, BlackRock said.