BlackRock has launched three new socially responsible ETFs providing exposure to different market-capitalization size segments of the US stock market.

BlackRock’s new iShares funds provide ESG-screened exposure to different size segments of the US equity market.

The funds track indices that apply environmental, social, and governance (ESG) criteria to S&P Dow Jones Indices’ flagship US benchmarks – the large-cap S&P 500, the mid-cap S&P 400, and the small-cap S&P 600.

The funds are the iShares ESG Screened S&P 500 ETF (XVV US), the iShares ESG Screened S&P Mid-Cap ETF (XJH US), and the iShares ESG Screened S&P Small-Cap ETF (XJR US).

They have listed on Cboe BZX Exchange.

The underlying S&P methodology removes companies that exceed certain revenue thresholds in industries considered incompatible with ESG principles. These industries include fossil fuels, tobacco, small arms, and controversial weapons.

Additionally, companies that are UN Global Compact violators, those embroiled in ESG-related controversies, as well as those holding significant reserves of coal, oil, natural gas, and shale, are also excluded.

The remaining companies are then weighted by float-adjusted market capitalization to form the relevant index. The indices are rebalanced on a quarterly basis.

BlackRock already offers six US sustainable equity ETFs, which collectively house almost $15 billion in assets under management, though these are in partnership with MSCI.

Competitive fees

XVV comes with an expense ratio of just 0.08% which is cheaper than the SPDR S&P 500 ETF (SPY US), the largest regular S&P 500 ETF, and also of course the largest ETF globally, which costs 0.095%.

State Street Global Advisors, the issuer of SPY, launched its own sustainable version in July. This ETF comes with an expense ratio of 0.10% and follows a variation of the ESG methodology described above.

For comparison, investors can get regular non-ESG exposure to the S&P 500 for as little as 0.03% through the $210bn iShares S&P 500 ETF (IVV US).

XJH and XJR come with expense ratios of 0.12%. In contrast, the $42bn iShares Core S&P Mid-Cap ETF (IJH US) and $40bn iShares Core S&P Small-Cap ETF (IJR US) charge 0.05% and 0.06%, respectively.

Growing appetite

Armando Senra, Head of iShares Americas, commented, “Sustainable investing was historically a values-based exercise – it has evolved into an investment risk and performance-based decision. Expanding our suite of sustainable funds is critical to help clients integrate ESG into their portfolios.”

Reid Steadman, Global Head of ESG Indices at S&P Dow Jones Indices, added, “The S&P Sustainability Screened Indices based on our flagship broad market benchmarks reflect investors’ growing appetite to incorporate ESG values into more mainstream equity investment strategies. We are very pleased that BlackRock has licensed our indices to develop sustainable versions of their iShares ETFs in the US.”

Carolyn Weinberg, Head of Global iShares Product, said, “To enable our clients to build better sustainable portfolios, earlier this year, we committed to doubling our ESG ETFs within the next few years to 150 products globally. We have partnered with index providers to innovate in both products and in analytics to construct ESG outcome-oriented portfolios with transparency into ESG risks and performance attribution. We’ve added 38 sustainable ETFs this year globally which sets the industry on a path to top $1.2 trillion in sustainable ETF and index mutual fund assets under management this decade.”