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February 14, 2020 at 03:42 PM
BlackRock’s iShares and State Street Global Advisors are expanding their ESG ETF offerings.
Later this year, iShares plans to introduce three ETFs that exclude fossil fuels as part of its “Advanced” product line for index-based ETFs that also screens out for-profit prisons, controversial weapons manufacturers, palm oil producers and companies with high controversy scores.
On March 4, iShares will be rebranding its Sustainable Core ETFs as “aware” funds, which include only companies with favorable environmental, social and governance characteristics but offer a similar risk and return profile to broad market indexes.
The Aware product line was originally introduced in March 2018 with several equity and fixed income ESG ETFs based on indexes from MSCI, which is also the index provider for the Advanced product line. In a few weeks, those indexes for the Aware-branded ETFs will add screens that exclude companies collecting revenues from thermal coal and oil sands.
There’s been a “growing demand for iShares sustainable ETFs and the need to offer greater choice to make sustainability our standard for investing,” said Armando Senra, head of Americas iShares.
One sign of that growing demand: a recent $600 million investment from Ilmarinen, Finland’s largest pension insurance company, in iShares ESG MSCI EM Leaders ETF (LDEM), which is a sustainable emerging markets ETF. Ilmarinen had previously helped iShares launch its ESG MSCI USA Leaders ETF (SUSL) in May, with an $850 million investment.
State Street, which has several index ESG ETFs, has filed an application with the Securities and Exchange Commission to trade its first actively managed ESG ETF.
The SPDR SSGA Responsible Reserves ESG ETF will invest in short-term fixed income securities including Treasuries, mortgage pass-throughs and corporate bonds and screen out most issuers that are involved in or derive revenue from extreme event controversies, controversial weapons, civilian firearms, thermal coal extraction, tobacco and UN Global Compact (sustainability principles) violations.
