ETF Watch: New Socially Responsible Fund From iShares

U.S.-focused environmental, social, governance ETF looks to optimize exposure to favorable characteristics.

Today BlackRock’s iShares unit is rolling out a fund that will target companies that are acceptable under certain socially responsible standards and seek to optimize its exposure to those standards. The iShares MSCI USA ESG Optimized ETF (ESGU) comes with an expense ratio of 0.28%, and will list on Nasdaq.

There has been a wave of ETF filings and launches with environmental, social and governance-related themes in 2016, and ESGU is just the newest fund to launch in that category.

“Clients are increasingly seeking ways to bring ESG considerations into their portfolios, and we are pleased to offer the tools that allow them to do that across domestic and international geographies,” said Deborah Winshel, managing director and global head of BlackRock Impact.

“Being able to optimize core U.S. holdings for ESG outcomes will empower more investors to incorporate their social values into their investment process,” she added.

ESGU tracks the MSCI USA ESG Focus Index, which is derived from the cap-weighted broad MSCI USA Index. The methodology mainly screens the parent index to exclude tobacco, weapons ad high-controversy names, and then uses an optimization process to maximize its exposure to companies with favorable ESG ratings. Companies are evaluated based on their exposure to ESG-related risks and opportunities relative to their peers within their industry, the prospectus said.

The prospectus also notes in a few places that the methodology seeks to reflect the sector breakdowns of the parent index.

The fund is a complement to the ESG ETFs launched earlier in the year by iShares that target developed non-U.S. markets and emerging markets, respectively. The iShares MSCI EAFE ESG Select ETF (ESGD) and iShares MSCI EM ESG Optimized ETF (ESGE), like ESGU, offer optimized exposure to socially responsible themes.

Contact Heather Bell at [email protected].