BlackRock launches sustainable ETF

US funds giant BlackRock has launched a sustainable bond exchange-traded fund (ETF) in response to growing demands for investments that incorporate environmental, social and governance (ESG) factors.

This fund is an extension of the firm’s ESG and impact product set. This includes active funds, index funds and ETFs. Between 2012 and 2014, assets in sustainable investing grew 61% globally to $21.4trn.

The iShares Euro Corporate Bond Sustainability Screened 0-3year Ucits (ETF (SUSE) monitors the Barclays MSCI Euro Corporate 0-3-year Sustainability Ex-Controversial Weapons Index. This includes short-term Euro-denomicated investment grade bonds issued by corporates with an ESG rating of ‘BBB’ or above, as determined by MSCI. Companies are rated on a total of 37 different ESG factors, including carbon emissions.

The index also excludes debt from companies involved with controversial weaponry, such as cluster bombs and land mines, as well as both chemical and biological weapons. Bonds included by the index are issued by corporates from across Europe, the Americas and Asia Pacific.

Earlier in January, BlackRock announced that its iShares business had seen $130bn of new inflows during 2015 as strong retail and institutional demand drove ETFs to post a record annual increase.

Hannah Skeates, iShares global head of sustainable investments at BlackRock, stated that “Sustainable investing is going mainstream and it is no longer a niche pursuit. Investors are placing greater emphasis on transparency and the ESG practices of companies, regardless of whether they are investing in the company’s equity or debt. ETFs are one of the investment products of choice because they are easy to use and investors can see the process and methodology in selecting social and environmental characteristics, all implemented in a single trade.”

She continued to observe that was the firm’s “first move into sustainable bond ETFs. It complements our European-domiciled sustainable equity ETFs, which has amassed almost $500m. Combined with the active and index funds within the BlackRock range, investors now have more choice for expressing their traditional investment views whilst taking into account the impacts of investment choices.”

This fund is physically-replicating and has a total expense ratio of 0.25%. Globally, BlackRock currently manages more than $200bn of assets across ESG screened and impact funds.

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