iShares Adds ‘Leaders’ ESG ETF

New fund will compete with DWS' emerging market ESG ETF.

BlackRock’s iShares unit has rolled out another ESG ETF. This one is a complement to the $1.9 billion iShares ESG MSCI USA Leaders ETF (SUSL), one of the most notable launches of 2019. The iShares ESG MSCI EM Leaders ETF (LDEM) excludes companies involved in controversial business lines and selects only stocks with the highest environmental, social and governance ratings in the MSCI Emerging Markets Index, using MSCI’s ratings.

LDEM comes with an expense ratio of 0.16% and lists on the Nasdaq stock market.

LDEM’s index represents approximately half of the total market capitalization of each sector in the parent index. The controversial industries that result in companies being excluded from the index include alcohol, tobacco, gambling, nuclear power and weapons, with some subgroups receiving categorical bans and others facing threshold limits, according to the prospectus.

Companies are evaluated and rated relative to their sector peers, with only companies rated “BB” or higher on a scale of “AAA” (best) to “CCC” (worst) included in LDEM’s underlying index, the document says.

There are currently seven other emerging market ETFs implementing ESG strategies, the largest of which is the $2 billion iShares ESG MSCI EM ETF (ESGE). However, the Xtrackers MSCI Emerging Markets ESG Leaders Equity ETF (EMSG) tracks a very similar index, just as the Xtrackers MSCI U.S.A. ESG Leaders Equity ETF (USSG) tracks a very similar index to SUSL. While SUSL and USSG cost the same, LDEM’s expense ratio undercuts the 0.20% charged by EMSG.

Contact Heather Bell at [email protected]