The firm’s sustainability funds will exclude companies with thermal coal and oil sands exposure, it announced today
US investment giant BlackRock announced yesterday that one of its fastest growing sustainable funds will stop investing in tar sands projects, as the firm steps up the integration of climate risk into its decision-making.
The firm’s market-leading exchange-traded fund (ETF) provider, iShares, is launching three new fossil fuel screened ETFs under a new ‘Advanced’ product range that will track indices with extensive screens, including for palm oil, controversial weapons, and for-profit prisons, the firm announced. Additional screens will exclude companies with thermal coal and oil sands revenue exposure, the firm explained, taking effect from 2 March.
The move is part of a rebranding of iShare’s environmental, social and governance (ESG) ETFs. First launched in October 2018 as Sustainable Core ETFs, they will now be named Aware ETFs. They will continue to operate in the same fashion, tracking indices that include companies exhibiting favourable ESG characteristics.
“Our clients’ growing preference for investing in top ESG companies is quickly driving an evolution in fund design and index construction,” said Carolyn Weinberg, managing director and global head of product for iShares. “We are stepping forward with our proposed Advanced range, which will enable investors to aggressively pursue companies with strong ESG scores while also avoiding those with riskier ESG business involvement, including fossil fuel reserves or ties to thermal coal or oil sands.”
The move builds on booming client demand for sustainable investment solutions, the firm added, with the $5bn in US iShares ESG ETF flows in 2019 and more than double year-on-year asset growth highlighting the growing demand.
“Sustainable investing has reached an inflection point as investors better understand the increasing impact that ESG-related risks have on asset pricing, and account for these risks in their portfolios,” said Armando Senra, head of Americas iShares at BlackRock. “That has translated into growing demand for iShares sustainable ETFs and the need to offer greater choice to make sustainability our standard for investing.”
The move was welcomed by campaigners pushing for asset managers like BlackRock to align their business practices to tackle escalating climate risks. Amazon Watch Climate and Finance Director Moira Birss said: “The exclusion of tar sands from sustainable funds is a clear indication that BlackRock is beginning to put its recent climate commitments into action; however, more steps are needed. Oil and gas extraction of all kinds are destroying our climate, especially in sensitive ecosystems like the Amazon. BlackRock and other asset managers must rapidly ramp up climate-risk standards across sustainable funds as well as their entire portfolios.”
The announcement is the latest climate-conscious move from the investment giant, which joined ClimateAction 100+ last month, after CEO Larry Fink detailed the firm’s intention to place climate risk at the heart of its investment decision-making in his 2020 letter to CEOs.