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BlackRock launches ESG tax-transparent funds

BlackRock has launched two funds with an environmental, social and governance focus, citing growing appetite among UK pension schemes for sustainable investment options.

The funds are tax-transparent or authorised contractual scheme funds; these types of funds allow investors to benefit from the same tax treatment in respect of their income and gains as they would have done if directly invested in underlying assets.

Pooled structure then gives advantage of the administrative benefits and scale efficiencies of pooling.

The BlackRock funds seek lower carbon footprints in global equity exposures. Their launch follows the investment managers December 2017  launch of the BlackRock ACS Low Carbon Equity Tracker Fund.

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Blackrock now has 12 tax transparent funds with has $50.8bn (£40.9bn) in assets under management.

BlackRock interim head of UK DC Alex Cave says: “The trend towards sustainable investing is clear, and demand from UK pension schemes for responsible investment options is only accelerating that trend.

“The launch of our two new ESG ACS funds aims to provide members with a greater voice in how they invest while maintaining the security, governance and scale benefits of investing through a pooled vehicle.”

The BlackRock ACS World ESG Equity Tracker Fund aims to improve the ESG score and reduce carbon exposure by at least 50 per cent compared to parent index, MSCI World.

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The benchmark – the MSCI ESG Focus Low Carbon Screened Index – has been constructed to exhibit risk and return characteristics similar to those of the MSCI World Index.

The tracker fund provides enhanced exposure to four return-enhancing equity factors, including momentum, quality, size and value while targeting better ESG and carbon outcomes.

The Fund’s underlying index – the MSCI World Select Multiple Factor ESG Low Carbon Target Index – aims to improve the ESG score by at least 20 per cent and reduce the carbon exposure by 50 per cent compared to the MSCI World Index.

Both funds also remove exposure to securities involved in controversial weapons, civilian firearms, tobacco, United Nations Global Compact violators, ESG controversies, and thermal coal.

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BlackRock Sustainable Investing Europe, EMEA head of platform strategy and innovation Amelia Tan says: “We’ve seen an overwhelming growth in demand from clients for sustainable investing products as investors no longer view their financial and sustainability goals as mutually exclusive.

“As investors increasingly recognise that they do not need to trade off performance for their ESG objectives, and, in fact, that sustainable investing may even enhance risk-adjusted returns in the long run, we expect to see ‘sustainable investing’ simply become ‘investing’.”

MSCI global head of ESG indexes Deborah Yang adds: “This suite of indexes are designed to target companies with strong governance metrics, tilt away from companies with exposure to carbon emissions and fossil fuel reserves, and screen for controversial companies and practices.”

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