BlackRock expands investor options with five new iShares MSCI Climate Transition Aware UCITS ETFs. According to the asset manager, this launch aims to provide access to leading companies in the transition to a low-carbon economy. It focuses on investing in companies based on their greenhouse gas emissions intensity relative to the sector and the measures they take to reduce emissions. Their expectation, based on their own survey, is that 56% of global institutional investors plan to increase their allocations to transition strategies in the next three years, with nearly half stating it as their top priority.
The range of funds offers investors tools to build equity portfolios that seek sector neutrality, using global and regional building blocks, while mitigating risks and capturing opportunities associated with the transition to a low-carbon economy. BlackRock believes this transition is a mega force affecting markets. In their view, the transition to a low-carbon economy involves profound changes unfolding over decades, reshaping production and consumption, and stimulating significant capital investment. BlackRock Investment Institute has identified several mega forces reshaping markets, including technological innovation, geopolitical fragmentation, and aging populations. BlackRock provides investors seeking to incorporate transition-related considerations into their portfolios with a broad range of options, both in active and index solutions.
“Innovation is central to BlackRock’s approach to developing products and solutions for clients as investors become more sophisticated in their investment goals. The transition to a low-carbon economy is set to drive significant capital reallocation as energy systems and technologies continue to evolve and develop. With the launch of the Climate Transition Aware range, we are expanding the variety we offer to clients seeking to mitigate investment risks and capitalize on the opportunities of this transition,” said Manuela Sperandeo, Head of iShares Product for EMEA at BlackRock.
The MSCI Transition Aware Select Index methodology includes companies that meet at least one of the following selection criteria: Science-based targets: Companies are selected if they have set one or more greenhouse gas emission reduction targets approved by the Science Based Targets initiative (SBTi). Green revenues: Companies are selected if they derive 20% or more of their revenue from green revenues. Emissions intensity: The index methodology ranks companies based on their greenhouse gas emissions intensity, provided they have published emission reduction targets. Subsequently, the index aims to select the top 50% of companies by sector.
The index methodology also excludes companies with “very severe ESG controversies” according to MSCI and those not complying with the United Nations Global Compact (UNGC) Principles. Companies involved in controversial weapons, tobacco, thermal coal mining, thermal coal power generation, and unconventional oil and gas extraction are also excluded. Within the Energy, Materials, Industrials, and Utilities sectors according to the Global Industry Classification Standard (GICS), additional exclusions are applied based on emissions intensity and those without targets or reporting. The exclusions of the fund range comply with the EU Climate Transition Benchmark (CTB) exclusion criteria.
Finally, Sebastian Lieblich, Managing Director and Head of Index Solutions EMEA at MSCI, added: “Investors are increasingly seeking data and tools to help them adapt their strategies to better manage the challenges and opportunities arising from the transition to a low-carbon economy. Clarity on companies’ commitments to reducing their carbon footprint through published targets, as well as their revenues from green businesses, is key in this process. The MSCI Transition Aware Select Index methodology can play a central role for investors looking to incorporate these parameters into their decision-making.”
For Funds Society