BlackRock’s Climate Change ETF Tops $1B in Assets

The iShares Paris-Aligned Climate MSCI USA ETF (PABU) topped $1 billion in assets under management Friday, suggesting that investors are increasingly willing to bet on technologies and services geared to fighting climate change. 

Inflows have already hit more than $182 million year to date—with $155 million coming in on Wednesday alone—taking its current AUM to $1.1 billion, according to data from Bloomberg. 

PABU, launched in February 2022, invests in a portfolio of mid- and large cap U.S. stocks that are “designed to be compatible with the objectives of the Paris Agreement by, in aggregate.”  The Paris Agreement is a 2015 international treaty that sets the goal of limiting the rise in global average temperatures to less than 2 degrees Celsius, or ideally, less than 1.5 degrees, above preindustrial levels. 

To meet the 1.5 degree target, “greenhouse gas emissions must peak before 2025 at the latest and decline 43% by 2030,” according to the United Nations, meaning that countries and companies around the world need to continue implementing rapid changes to head off the worst effects of the climate crisis. 

PABU’s milestone may show an increase in intererst in companies that are postiviely impacting climate change. While Europe still has a far higher percentage of assets in ESG-focused ETFs, more than a fifth according to PwC, the rapid growth of PABU shows that U.S. investors may be following suit. 

The increased interest also comes on the heels of a new report by the International Panel on Climate Change, which was released last month and underscored the seriousness of the climate crisis. 

ESG Options 

At the end of March, BlackRock launched another ESG-focused ETF, the iShares Breakthrough Environmental Solutions ETF (ETEC), which is another viable option for investors. 

While ETEC invests in global companies that specifically working on technologies to address climate change, PABU is much less broad. 

The top three holdings for PABU are Microsoft, Apple and Amazon, fairly standard largest holdings for cap-weighted U.S. funds. Whereas ETEC’s top holdings EON, Tesla and Nibe Industrier, are an electrical utility, an electric carmaker and an HVAC manufacturer, all companies are specifically involved in lowering the emissions involved in generating or using energy. 

etf.com named PABU one of the nominees for “Best New ESG ETF” in its 2023 etf.com Awards at the beginning of March, and its rapid growth in assets shows it has resonated with investors.