BlackRock has added a new fund – the iShares ESG MSCI USA Leaders ETF (SUSL US) – to its suite of environmental, social, and governance (ESG) ETFs.
Anna Hyrske, Head of Responsible Investing at Ilmarinen.
The ETF, which has listed on Nasdaq Exchange, comes to market with more than $800 million in seed capital from Ilmarinen, Finland’s largest pension insurance company.
Ilmarinen collaborated with BlackRock on the development of the fund.
“We’re focused on integrating ESG characteristics throughout our investment strategy, so funds like this help us mirror our values as a company while adding investment value in the process,” said Anna Hyrske, Head of Responsible Investing at Ilmarinen.
With the addition of this new fund, BlackRock’s iShares sustainable investing platform is now home to more than $9 billion in assets globally.
Fund methodology
The fund’s underlying reference index is the MSCI USA Extended ESG Leaders Index which provides exposure to US-listed large- and mid-cap companies with high ESG ratings relative to their sector peers. The ESG rating is defined by index provider MSCI.
The starting universe is the broad market MSCI USA equity index which currently comprises 624 constituents, covering 85% of the country’s market cap.
Companies involved in tobacco, alcohol, gambling, nuclear power, controversial weapons, and civilian firearms are excluded. Additionally, firms that are perceived to be embroiled in ESG-related controversies are also removed from the selection pool.
The methodology then utilizes MSCI’s ESG rating system to evaluate corporate governance, focusing on the most relevant factors by industry and risk exposure, to identify ESG leaders and laggards within each industry.
The index targets a 50% sector representation versus the parent index and is weighted by free float-adjusted market cap.
The fund comes with an expense ratio of 0.15%.
Déjà vu?
The strategy and name of the ETF closely resemble that of the Xtrackers MSCI USA ESG Leaders Equity ETF (USSG US) which launched in March. The Xtrackers fund was also developed in collaboration with Ilmarinen and it too saw over $800 million in creations on its first day of trading, understood to be the Finnish pension provider.
The main difference between the two funds is that the MSCI USA ESG Leaders Index, which underlies the Xtrackers fund, adjusts its sector weights to match those of its parent MSCI USA index. By contrast, the index underlying to the iShares fund does not seek to match the risk characteristics of the parent index.
The other difference is price. The Xtrackers fund is slightly cheaper, coming in at 0.10% versus iShares’ 0.15%.