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BlackRock secures biggest ever ETF launch as a green wave of investment is emerging

BlackRock secures biggest ever ETF launch as a green wave of investment is emerging

Institutional investors have put $ 1.25 million into a new U.S. fund aimed at identifying the winners of the transition to a low-carbon world, making it the largest market for exchange-traded funds and highlighting rising demand. ESG products.

BlackRock, the U.S. Transition Carbon Readiness Fund, began trading on Thursday, the largest listing of the previous ETF, the iShares ESG MSCI USA Leaders fund, which opened in May 2019 for $ 850 million.

The sister fund, which invests in companies outside the U.S., was also launched on Thursday after attracting $ 475 million in investors, one of the largest new ETFs ever launched.

Instead of excluding companies that underestimate climate-related metrics, the new ETFs take the underlying equity index (Russell 1000 and MSCI All World U.S. index, respectively) and assign portfolio weights that reflect a carbon transition training score.

“Winners and losers will emerge in every sector and industry based on each company’s ability to adapt and guide their strategies and business models,” said Larry Fink, CEO of BlackRock.

“More and more capital is being channeled into sustainable strategies. These funds will allow investors to understand which companies are moving faster than others. ”

Investing in ESG it aims to channel money to companies with strong environmental, social and governance records. According to Morningstar, all assets in the sector rose 50 percent to a record $ 1.7 billion last year.

Meanwhile, more and more government, business and asset managers they are committed to achieving the zero target for greenhouse gas emissions by 2050. Carbon transition ETFs are being touted as a way to drive the trend and take advantage of it.

“These ETFs are a way to find management that will change the company’s thinking about climate change,” said Christopher Ailman, head of investment at California State Teachers ’Retirement System or Calstrs.

Ailman said the perspective many business leaders have on industry comparisons will increasingly include their carbon footprint and how it affects their share price. “Everything that is measured is managed.”

Calstrs made a $ 650 million contribution to the new U.S. ETF and a $ 350 million global fund. Other investors launched were Temas, Sura Asset Management, Varma Mutual Pension Insurance Company, Profuturo Group, FM Global and RenaissanceRe.

ETF companies are ranked in the “carbon transition readiness” score, which reflects their confidence in energy production, clean technologies, energy, waste and water management. Having a higher forecast to reduce carbon will cause a company to be overweight in ETFs compared to industry rivals. Data is extracted internally by BlackRock through Aladdin Climate and third-party providers by MSCI, Sustainalytics and Refinitiv.

Ailman told Calstrs that Ailman told Calstrs the hope is that companies moving into a low-carbon economy will outperform in the long run for the benefit of investors.

“As a long-term investor, we are looking for a big wave to ride and although it will take time to move to a low-carbon world, our portfolios need to mitigate the risk of climate change. By 2050 or earlier to achieve a net zero carbon target, investors must start now.”

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