• New ESG Strategy: The iShares MSCI World Utilities Sector Advanced UCITS ETF (WUTS) offers ESG-integrated exposure to 51 utility stocks across 23 developed markets.
• Carbon & Fossil Fuel Cuts: The fund targets a 30% reduction in carbon emissions and fossil fuel reserve exposure versus the parent index.
• Performance Volatility: Despite strong 2023 returns (+3.6%), the ESG-tilted index has underperformed its parent over the past decade.

BlackRock has expanded its sustainable investment suite with the launch of the iShares MSCI World Utilities Sector Advanced UCITS ETF (WUTS), now trading on Euronext Amsterdam. The ETF integrates ESG metrics while targeting global utility companies and carries a total expense ratio (TER) of 0.18%.

“The fund adopts a binding and significant ESG optimisation approach to sustainable investing,” BlackRock said, highlighting its aim to provide investors with improved ESG scores relative to the broader utilities index.

WUTS tracks the MSCI World Utilities Advanced Select 20 35 Capped Index, which includes 51 utility sector stocks from 23 developed countries. The index is engineered to:

• Enhance ESG factor exposure by 20%
• Cut carbon-equivalent emissions and fossil fuel reserves by 30%
• Cap the largest holding at 35% and others at 20%, with a 10% quarterly buffer to ensure diversification

The fund is now accessible to investors across 14 European markets, including the UK, France, Germany, Italy, and Switzerland.

Despite its ESG focus, the index has shown mixed long-term performance:

• +3.6% in 2023, beating the parent index’s 0.3% gain
• –13.1% in 2022, compared to a –4.7% decline for the broader benchmark
• Over the past 10 years, it underperformed the MSCI World Utilities Index by 1.5%

WUTS is positioned for medium to long-term investors seeking ESG exposure in the utility sector. However, BlackRock cautions that, “Investment risk is concentrated in specific sectors, countries, currencies or companies. This means the Fund is more sensitive to any localised economic, market, political, sustainability-related or regulatory events.”

The launch follows BlackRock’s broader strategy to balance market exposure, including a recently introduced S&P 500 ETF capped at 3% per constituent. With over $3 trillion in AUM across 468 ETFs, BlackRock remains the largest ETF provider in the U.S.

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“The fund aims to achieve a return… which reflects the return of the MSCI World Utilities Advanced Select 20 35 Capped Index,” according to BlackRock’s investment objective.

Investors should note that all currency-hedged share classes use derivatives, introducing spill-over risk, though the firm says it has mitigation procedures in place.

Capital at risk. ESG screening may reduce the fund’s investment universe and could impact returns relative to non-ESG funds.

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