BlackRock Upgrades Criteria for ESG ETFs, Creating the Largest Range of Climate-Aligned ETFs
Investment giant BlackRock announced today several sustainability-focused upgrades to the benchmarks underlying the iShares ESG Enhanced UCITS ETF range, which will see the $9 billion AUM suite become the largest climate-aligned ETF range.
The changes to the ETFs’ benchmarks, the MSCI ESG Enhanced Focus Indices, include updates to meet the EU’s Climate Transition Benchmark (CTB) requirement. Introduced as part of the EU Action Plan on Sustainable Finance, the EU’s Climate Transition Benchmark label indicates that a benchmark’s underlying assets are selected, weighted or excluded in a way that ensures the benchmark is aligned with a 1.5ºc warming trajectory, incorporating at least a 30% emissions reduction in greenhouse gas (GHG) emissions relative to the market index, and including Scope 3 emissions in its carbon intensity requirements.
The benchmarks have also been upgraded to include more stringent screens for other ESG issues, including conventional weapons, environmental harm, and unconventional oil and gas.
The changes will see the ETFs change their classification under the EU’s SFDR regulation to Article 9, indicating that the funds support sustainable investment.
Manuela Sperandeo, BlackRock’s EMEA Head of Sustainable Indexing said:
“These improvements to the iShares ESG Enhanced UCITS ETF range raise the standard for incorporating environmental characteristics into sustainable ETFs. For the first time, ESG and climate considerations, in line with EU regulation, are united into a range of ETFs offering a choice of exposures covering global equities.
“Our focus continues to be on aligning ESG ETFs with emerging standards in sustainable investing and offering clients more choice when seeking to implement their sustainability goals.”
Remy Briand, Head of ESG and Climate at MSCI, added:
“Incorporation of the EU CTB in the MSCI ESG Enhanced Focus Indexes reflects investor demand to drive the transition to a 1.5°C world. The outcome of this consultation enables MSCI to continue to provide industry-leading ESG and Climate Indexes, some of which enable investors to incorporate decarbonization alongside ESG with close-alignment to the MSCI parent index.”