BlackRock : iShares MSCI Climate Transition Aware UCITS ETFs can help investors access companies with forward-looking science-based targets and that generate green revenues
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Manuela Sperandeo, BlackRock’s Europe and Middle East Head of iShares Product
iShares MSCI World Climate Transition Aware UCITS ETF
iShares MSCI Europe Climate Transition Aware UCITS ETF
iShares MSCI EMU Climate Transition Aware UCITS ETF
iShares MSCI US Climate Transition Aware UCITS ETF
iShares MSCI Japan Climate Transition Aware UCITS ETF
The launch of iShares MSCI Climate Transition Aware UCITS ETFs aims to provide access to companies leading in the transition to a low carbon economy. Companies are also included based on sector relative greenhouse gas emissions intensity and measures taken to reduce emissions.
In a survey of 200 global institutional clients that BlackRock conducted in June 2023, 56 percent[1] said they plan to increase their allocations to transition strategies over the next three years, and nearly half said it was their top priority.
The fund range provides investors with tools to build equity portfolios that aim for sector neutrality, using global and regional building blocks, while mitigating the risks and capturing the opportunities associated with the transition to a low carbon economy, which BlackRock believes is a mega force affecting markets.
The low-carbon transition is a series of profound shifts playing out over decades, reshaping production and consumption and spurring vast capital investment. The BlackRock Investment Institute has identified several mega forces reshaping markets including technological innovation, geopolitical fragmentation, and aging populations.
BlackRock provides investors looking to incorporate transition-related considerations into the portfolio with a broad choice across active and index solutions.
Manuela Sperandeo, BlackRock’s Europe and Middle East Head of iShares Product said: “Innovation is central to BlackRock’s approach to developing products and solutions for clients, as investors become more sophisticated in their investment objectives. The transition to a low carbon economy is set to spur a significant reallocation of capital as energy systems and technologies continue to evolve and develop. With the launch of the Climate Transition Aware range, we are expanding the choice we offer clients seeking to mitigate the investment risks and capture the opportunities from this transition.”
The MSCI Transition Aware Select Index methodology includes companies that meet at least one of the following selection criteria:
Science-based targets – Companies are selected if they have set one or more greenhouse gas emissions reduction target(s)[2] approved by the Science Based Targets initiative (SBTi).
Green Revenues – Companies are selected if they derive 20% or more of their revenues from green revenues.[3]
Emissions Intensity – The index methodology ranks companies based on greenhouse gas emissions intensity so long as they have published emission reduction targets. Subsequently, the index aims to select the top 50%[4] of companies per sector.
The index methodology also screens out companies with ‘Very Severe’ MSCI ESG Controversies and companies not in compliance with the UN Global Compact Principles (UNGC)[5]. Also excluded are companies involved in Controversial Weapons, Tobacco, Thermal Coal Mining, Thermal Coal Power Generation and Unconventional Oil & Gas Extraction. Within the Energy, Materials, Industrials and Utilities Global Industry Classification Standard (GICS) sectors, additional exclusions apply based on emissions intensity and those without targets or reporting. The fund range’s exclusions meet the exclusion criteria of the EU Climate Transition Benchmarks (CTB)[6].
Sebastian Lieblich, Managing Director, Head of EMEA Index Products, MSCI said: “Investors are increasingly looking for data and tools to help them adapt their strategies to better manage the challenges and opportunities stemming from the transition to a low-carbon economy. Clarity on the commitments of businesses to reduce their carbon footprint through published targets, as well as their revenues from green businesses are key in this process. The MSCI Transition Aware Select Indexes methodology can play a central role for investors looking to factor these parameters in their decision making.”
[1] Page 5, https://www.blackrock.com/corporate/literature/brochure/global-transition-investing-survey.pdf
[2] Source: MSCI Transition Aware Index Methodology as of 30 April 2024. Company level emission reduction targets which have been approved by Science Based Targets initiative (SBTi). More details on SBT are available at https://sciencebasedtargets.org/companies-taking-action.
[3] Source: MSCI Transition Aware Index Methodology as of 30 April 2024. For more information on the index, please visit: https://www.msci.com/index-methodology. Green revenues are defined as `weighted average of index constituents’ percentage of revenue derived from Alternative Energy, Energy Efficiency, Green Building, Pollution Prevention, Sustainable Water, or Sustainable Agriculture.
[4]By cumulative free float-adjusted market capitalization. Source: MSCI Transition Aware Index Methodology as of 30 April 2024. The emission intensity-based selection is described in the Index Methodology document.
[5] https://unglobalcompact.org/what-is-gc/mission/principles
[6] EU CTB exclusions are listed in Article 12(1)(a)-(c) of Commission Delegated Regulation (EU) 2020/1818
Source: ETFWorld.co.uk
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