Weeks after announcing a shift toward making sustainability a standard for its investment decisions, BlackRock is introducing new ESG ETFs, as well as enhancing and rebranding some of its current funds, the asset manager announced.
The new ETFs will be provided by iShares and come after U.S. iShares ESG ETF annual asset growth more than doubled in 2019 from the previous year, with $5 billion in flows last year. The expanded options will make it easier for BlackRock to place a greater emphasis on sustainability, according to Armando Senra, the head of Americas iShares at BlackRock.
“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,” he said.
Last month, in an annual letter to company executives, BlackRock CEO Larry Fink announced that the world’s largest asset manager would be highlighting sustainability in investment strategies, writing that the evidence of climate risk and greater global awareness about the hazards of climate change meant the world was “on the edge of a fundamental reshaping of finance.”
“What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding? How can we model economic growth if emerging markets see their productivity decline due to extreme heat and other climate impacts?” Fink wrote. “These questions are driving a profound reassessment of risk and asset values.”
Some of the potential changes Fink cited in his letter included making sustainability an integral part of portfolio construction and risk management and launching new investment products to screen for fossil fuels, which BlackRock’s three newly introduced ETF funds, categorized in an “Advanced” product range, purport to do.
According to Carolyn Weinberg, a managing director and global head of product for iShares, client interest in companies with favorable ESG ratings was causing an “evolution” in fund and index construction, and will help clients pursue investment in companies with favorable ESG scores, while avoiding those who may have ties to things like fossil fuel reserves, thermal coal or oil sands.
As of the end of last year, BlackRock had approximately $7.43 trillion in assets under management, with iShares having more than 900 ETFs and $2.24 trillion in AUM.