Doubling Down On Sustainability: BlackRock iShares Planning Major ESG ETF Expansion

BlackRock BLK, the world's largest asset manager and parent company of iShares, the biggest sponsor of exchange traded funds, is putting its money where its mouth when it comes to sustainable investing.

“We intend to double our offerings of ESG ETFs over the next few years (to 150), including sustainable versions of flagship index products, so that clients have more choice for how to invest their money,” BlackRock said on Tuesday.

In the U.S., BlackRock offers 10 ETFs adhering to environmental, social and governance (ESG) investing principles, according to the iShares home page. However, that group doesn't include funds such as the iShares Global Clean Energy ETF ICLN and the iShares MSCI ACWI Low Carbon Target ETF CRBN that would fit the bill as environmentally friendly investment options.

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Why It's Important

BlackRock's plan to expand its ESG ETF suite comes at a time of rapid growth for that segment of the ETF space, but there's much more growth to be had because of about 100 US-listed ESG ETFs, just six have at least $1 billion in assets under management. Five of those funds, including the iShares MSCI KLD 400 Social ETF DSI and the iShares ESG MSCI USA Leaders ETF SUSL, are iShares products.

BlackRock is also exploring avenues for expanding and simplifying fossil fuels screening.

“In addition to more choice, clients have asked for a simpler way to integrate ESG in their existing portfolios,” said the asset manager. “To meet that need, we will have three ESG ETF suites in the US and EMEA: one that enables clients to screen out certain sectors or companies that they do not want to invest in; one that enables clients to improve ESG scores meaningfully while still optimizing their ability to closely track market-cap weighted indexes; and one that enables clients to invest in companies with the highest ESG ratings and features our most extensive screens including one for fossil fuels.”

What's Next

Another frontier for ESG expansion for iShares and other ETF sponsors is fixed income, an area the issuer has a footprint in with the iShares ESG U.S. Aggregate Bond ETF EAGG among other funds.

“BlackRock will be expanding our range of active strategies focused on sustainability as an investment outcome, including funds focused on the global energy transition, and impact investing funds that seek to promote positive externalities or limit negative ones,” said the fund sponsor.