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Jun 18, 2020

BlackRock bets on increased ESG enthusiasm with four new ETFs

Ways Canada's oil and gas industry could pivot to low carbon


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BlackRock Inc. is moving forward in fulfilling Larry Fink’s commitment to tackling the climate crisis with a slate of exchange-traded funds.

The asset manager launched several ETFs that track companies using environmental, social and governance criteria on Thursday.

Among the changes BlackRock’s chief outlined in his January letter was making sustainability integral to portfolio construction and risk management.

Fink pledged to double sustainable ETF offerings, push index providers to expand their environmental, social and governance benchmarks and drop thermal coal producers from BlackRock’s approximately US$1.8 trillion in active strategies.

Investor interest in value-based and sustainable strategies has surged amid protests against racism and a deadly outbreak that has infected more than 8.3 million people around the world.

“One thing that has emerged as a result of the virus and the lockdown is a renewed appreciation for the environment broadly speaking,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management.

The new suite of BlackRock funds includes: the iShares ESG Aware Conservative Allocation ETF (EAOK); the iShares ESG Aware Moderate Allocation ETF (EAOM); the iShares ESG Aware Growth Allocation ETF (EAOR); and the iShares ESG Aware Aggressive Allocation ETF (EAOA). Each has a 0.18 per cent expense ratio.

BlackRock has also filed for four ESG funds that provide exposure to companies with higher scores in that category while also screening for controversial activities such as fossil fuels, palm oil, for-profit prisons and weapons.

Two of them -- the iShares ESG Advanced MSCI USA ETF (USXF) and the iShares ESG Advanced MSCI EAFE ETF (DMXF) -- launched on Thursday as well.

“This strong demand across our global wealth and institutional clients is driving more innovation in index and product development and portfolio solutions,” the firm said in a statement.

After taking in a record US$4 billion in April, ETFs focused on ESG have seen US$52 million in outflows so far this month, according to data compiled by Bloomberg. Three BlackRock products -- ESGU, ESGE, ESGD -- have lured US$8.5 billion out of the total US$13.1 billion inflows for the category this year.