Twice the management fees for investors to be in ESG funds: Pacific Research Institute fellow
An exchange-traded fund investing in U.S. companies that BlackRock Inc. considers most likely to prosper in the transition to a low-carbon world attracted record inflows Thursday in its first day of trading.
Investors plowed US$1.25 billion into the BlackRock U.S. Carbon Transition Readiness ETF, making it the biggest launch in the ETF industry’s three-decade history, according to data compiled by Bloomberg. First-day flows on this scale are typically powered by large institutional investors lined up by the ETF before launch.
The BlackRock ETF will focus investments in shares of Russell 1000 companies that are deemed to be best positioned for the energy transition, taking into account issues such as clean technology and waste and water management.
To have any chance of meeting the Paris climate goals of limiting global warming to below 2 degrees Celsius, companies in all industries will need to lower their carbon footprint. This great rewiring of the global economy will affect companies’ long-term profitability and BlackRock “doesn’t see itself as a passive observer,” Chief Executive Officer Larry Fink said earlier this year in a letter to clients.
BlackRock said in January it manages US$50 billion “in solutions that support the transition to a low-carbon economy,” including green bonds and a renewable power infrastructure business that invests in the wind and solar power markets. The asset manager also pledged to expand dedicated low-carbon, transition-readiness strategies to offer investors exposure to companies that are most effectively adapting to transition risks.
A record US$31 billion went into ESG-focused ETFs in 2020, almost four times the prior year. About US$6.3 billion was added in January, also the most ever, as investors bet the Democrats clean sweep of the U.S. government would usher in a swath of green policies.
ESG ETF assets are at a record US$74.8 billion, up from less than US$10 billion two years ago. The largest ETF in the space is the iShares ESG Aware MSCI USA ETF, with US$16.3 billion of assets. It’s trading at a record after returning more than 50 per cent in the past 12 months, and is up 9.3 per cent in 2021.
The Financial Times earlier reported the introduction of the BlackRock fund.