iShares Debuts ESG Min Vol ETF

'ESMV' is an ESG-flavored clone of one of the largest-outflow ETFs this year.

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Reviewed by: Dan Mika
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Edited by: Dan Mika

BlackRock’s newest ETF has an ESG spin on a minimum volatility strategy that has suffered billions in outflows so far this year.

The iShares ESG MSCI USA Min Vol Factor ETF (ESMV) debuted on the Nasdaq Thursday, sporting an expense ratio of 0.18%.

ESMV follows the same strategy as the iShares MSCI USA Min Vol Factor ETF (USMV), which uses an algorithm-driven index to pick a low volatility portfolio of mid and large cap U.S. stocks.

However, ESMV’s index removes companies deriving at least 5% of revenue from tobacco, firearm production, oil and gas, and other industries that tend to be targeted by ESG screens. Companies with severe business controversies as defined by MSCI are also excluded.

ESMV is aiming to have a combined ESG score that’s 20% higher than the MSCI USA Index, and has at least 30% less exposure to carbon emissions than that benchmark. It will charge an additional 3 basis points over USMV for that greener strategy.

The minimum volatility strategy has underperformed through the extended and record-breaking bull run in equities over the last year. USMV has gained 23.05% over the past 12 months, which lags behind the Invesco PureBeta MSCI U.S.A. ETF (PBUS) and its 37.78% gain during the same period.

 

Chart courtesy of Bloomberg

 

USMV has also seen more than $8 billion in outflows, accounting for 27.6% of its AUM from the start of 2021, according to ETF.com data provider FactSet. Its absolute loss is the largest among all U.S.-listed equity ETFs, and trails only behind the iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD) and the SPDR Gold Trust (GLD) in outflows.

 

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Chart courtesy of FactSet

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Contact Dan Mika at [email protected], and follow him on Twitter

Dan Mika is a reporter for etf.com. He has previously covered business for the Ames Tribune and Cedar Rapids Gazette in Iowa, and BizWest Media in Fort Collins, Colorado. Dan holds a bachelor's degree in journalism from Truman State University.