BlackRock has launched a five sustainable iShares index mutual funds for the UK wealth market.
They look to address the gap in the UK wealth market for strategies that help clients make a sustainable transition with indexing.
The funds cover regional and country-specific equity exposures which maximize environmental, social and governance (ESG) characteristics.
BlackRock EMEA head of sustainable indexing Manuela Sperandeo said: “We are excited to launch this new range of funds which set the standard for sustainable index investing in the UK market.
“Investors across the country, including pension funds, wealth managers and private banks, are turning to solutions that enable them to incorporate ESG considerations into their standard portfolios.
“These new sustainable, core index building blocks allow investors to build low-cost, global equity portfolios with the flexibility to adjust exposures according to their asset allocation needs.”
BlackRock has worked with Morningstar Indexes to design a set of ESG equity indexes covering global, regional, and country-specific exposures.
Each index has been designed to maintain a target tracking error, assigned for each geography.
This is to reflect UK investor preferences to closely match the performance of the parent broad market indexes.
The Morningstar ESG enhanced index methodology applies a set of ten exclusionary screens. They limit each fund’s exposure to controversial activities.
In addition to BlackRock’s baseline screens, a set of screens specific to the UK market has been incorporated. They relate to alcohol, gambling and adult entertainment.
Businesses with a severe controversy score, as defined by ESG data provider Sustainalytics are excluded. This is also the case for those with a missing ESG risk rating or controversy score.
iShares ESG Enhanced Equity UK Index Fund Range
| Fund name | Benchmark | OCF |
| iShares Continental European Equity ESG Enhanced Index Fund (UK) | Morningstar® Developed Europe ex-UK ESG Enhanced Index | 0.06% |
| iShares UK Equity ESG Enhanced Index Fund (UK) | Morningstar® UK ESG Enhanced Index | 0.05% |
| iShares Japan Equity ESG Enhanced Index Fund (UK) | Morningstar® Japan ESG Enhanced Index | 0.09% |
| iShares US Equity ESG Enhanced Index Fund (UK) | Morningstar® US Markets ESG Enhanced Index | 0.05% |
| iShares Pacific ex Japan Equity ESG Enhanced Index Fund (UK) | Morningstar® Developed Markets Asia Pacific ex-Japan ESG Enhanced Index | 0.12% |
| iShares Emerging Markets Equity ESG Enhanced Index Fund (UK) | Morningstar® Emerging Markets ESG Enhanced Index | 0.19% |
The securities are then re-weighted with the goal of optimising for ESG characteristics while maintaining the risk profile of the parent universe.
Moreover, the indices have an explicit decarbonisation target. This is to respond to the demand from UK investors for climate aware investment products.
Morningstar Indexes director of product management, EMEA & ESG, Rob Edwards said: “We are thrilled to build on our global collaboration with BlackRock to offer differentiated index-based strategies to help European investors address their growing sustainable investment needs.
“Our suite of ESG indexes draw on the capabilities of Morningstar Indexes global research team in addition to the underlying ESG ratings of highly respected ESG ratings provider Sustainalytics, also part of Morningstar.
“In combination with the strength of BlackRock, our indexes represent compelling value for the end investor.”
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