BlackRock has expanded its suite of socially responsible fixed income ETFs with the launch of Europe’s first ETF providing exposure to a sustainable global aggregate bond portfolio.
Brett Olson, Head of Fixed Income iShares in EMEA for BlackRock.
The iShares Global Aggregate Bond ESG UCITS ETF has been listed on Euronext Amsterdam in US dollars (Dist: AGGE NA) and on Xetra through a euro-hedged share class (Acc: AEGE GY).
The fund is designed to serve as an ESG-friendly version of BlackRock’s $5.5 billion iShares Core Global Aggregate Bond UCITS ETF (AGGG LN).
Brett Olson, Head of Fixed Income iShares in EMEA for BlackRock, said: “As the shift to sustainable investing continues to accelerate, we have seen strong demand – from across client segments – for a sustainable global aggregate exposure.
“Many investors transitioning their fixed income allocations are embracing indexing due to the diversification, transparency, and efficiency that ETFs provide. We believe the iShares Global Aggregate Bond ESG ETF meets investors’ needs for a diversified global fixed income investment grade-rated building block, whilst also offering improved sustainable characteristics.”
Methodology
The ETF is linked to the Bloomberg MSCI Global Aggregate Sustainable and Green Bond SRI Index which screens the parent Bloomberg Global Aggregate Index according to various ESG criteria.
The parent index covers government, government-related, corporate, and securitized bonds denominated in more than 30 currencies and issued by issuers from over 70 developed and emerging market countries. Bonds in the parent index are fixed-rate, investment-grade, have more than one year remaining until maturity, and satisfy minimum size thresholds.
The methodology removes violators of UN Global Compact principles, issuers embroiled in severe ESG-related controversies, and issuers with significant operations linked to alcohol, tobacco, gambling, adult entertainment, genetically modified organisms, nuclear power, civilian firearms, military weapons, thermal coal extraction, thermal coal power generation, and unconventional oil and gas. Sovereign issuers on the UN sanctions list are also removed.
Using insights from MSCI ESG Research, corporate issuers are then assigned ESG scores between AAA and CCC based on the most relevant ESG factors by industry and risk exposure. Companies with ESG ratings below BBB (equivalent to average) are also eliminated from the selection pool.
The remaining constituents are weighted by market value while ensuring at least 10% of the index is allocated to green bonds – fixed income securities where the proceeds are exclusively applied to projects with environmental sustainability purposes.
Index rebalancing occurs on a monthly basis.
The ETF is classified as Article 8 under the European Union’s Sustainable Finance Disclosure Regulation (SFDR) and comes with an expense ratio of 0.10%, matching the cost of BlackRock’s traditional global aggregate bond ETF.