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- Sustainability-Focused: New ETF emphasizes environmentally sustainable real estate investments.
- Exclusion Criteria: Excludes companies involved in oil sands, thermal coal, and controversial weapons.
- Cost-Effective: Offers the lowest expense ratio in its category at 0.18%.
BlackRock’s New ESG Tilted ETF
BlackRock has introduced the iShares Global Real Estate Environmental Tilt UCITS ETF, a pioneering exchange-traded fund (ETF) designed to integrate environmental, social, and governance (ESG) principles into global real estate investments.
“The iShares Global Real Estate Environmental Tilt UCITS ETF will provide investors with exposure to a diversified portfolio of real estate companies while promoting sustainability,” said a BlackRock spokesperson.
Enhanced ESG Screening
The ETF tracks the FTSE EPRA Nareit Developed Green Low Carbon Target Select UCITS Capped Index. This benchmark employs rigorous ESG screening, excluding companies involved in oil sands, thermal coal, controversial weapons, tobacco, and those with significant controversies.
Environmental and Financial Benefits
BlackRock highlights that the ETF, classified under Article 8 of the EU’s SFDR regulation, will achieve a weighted average environmental indicator at least 20% better than its investment universe. This focus ensures a reduction in energy usage and carbon intensity, and an improvement in green building certification.
“The new fund’s benchmark excludes issuers based on involvement in areas including oil sands, thermal coal, weapons, tobacco, and controversies,” BlackRock added. “Following the exclusion screening, remaining constituent weights are adjusted to achieve improved sustainability allocations based on green building certification, reduction in energy usage, and reduction in carbon intensity.“
Investment Advantages
BlackRock points out that the ETF, with a total expense ratio of 0.18%, is not only the first in Europe to offer an environmental tilt to real estate but also the most cost-effective option for global exposure. The ETF tracks 343 stocks, holds a dividend yield of 3.8%, and maintains a price-to-earnings ratio of 17x.
Inflation Hedge
The ETF can also serve as a natural inflation hedge. As rents and property values typically rise with inflation, the ETF provides a buffer against inflationary pressures.
Recent Developments
The launch of this fund follows BlackRock’s rollout of a new suite of ETFs aimed at offering investors exposure to companies leading the transition to a low-carbon economy. “Last month, we unveiled a five-strong climate transition ETF range,” BlackRock mentioned.
Sustainability and Compliance
BlackRock ensures that the ETF adheres to strict sustainability and compliance standards. The ETF’s benchmark index uses Sustainalytics controversy data and additional ESG screens to exclude non-compliant companies, ensuring alignment with international norms and standards.
Related Article: Google and BlackRock Partner to Develop 1 GW Solar Capacity in Taiwan, Boosting Regional Decarbonization Efforts
Risk Management
Investing in this ETF comes with certain risks. BlackRock advises potential investors to assess the ESG screening’s impact on the value of investments compared to funds without such screening. The fund’s performance can be influenced by daily stock market movements, political and economic news, company earnings, and significant corporate events.
BlackRock’s iShares Global Real Estate Environmental Tilt UCITS ETF offers a groundbreaking opportunity for investors seeking to combine sustainability with financial performance. With its focus on ESG principles, rigorous screening processes, and cost-effective structure, this ETF sets a new standard in sustainable real estate investment.