BlackRock’s iShares unit rolled out a fund Thursday that targets REIT and real estate holding and development companies that are more environmentally friendly than their peers. The iShares Environmentally Aware Real Estate ETF (ERET) tracks the FTSE EPRA Nareit Developed Green Target Index.
The launch of ERET increases the asset allocation choices for environmental, social and governance investors as it stands alone as the sole ESG REIT ETF available in the U.S. market.
iShares offers an extensive family of ESG-related ETFs that includes ETFs offering varying levels of ESG screening; equity and fixed income products; asset allocation ETFs; and specialty funds focused on water management and infrastructure. A total of $55.9 billion is invested in those funds.
At launch, the fund held 366 companies, the top holdings of which include Prologis REIT Inc. at 6.3%; Equinix REIT Inc. at 5.64%; and Digital Realty Trust REIT Inc. at 2.42%.
ERET comes with an expense ratio of 0.30% and lists on the Nasdaq stock exchange. The fund notes that buildings are the source of 37% of global carbon emissions. The “target” in the index name indicates it seeks to focus on companies that have a 30% increase in green certification and a 10% reduction in energy usage.
The index selects its components from across the spectrum of developed markets. Eligible companies must have a minimum or increased level of green certification through a reputable program that considers a company’s assets and a variety of sustainability-related criteria. They must also exhibit average or better-than average carbon emissions relative to the selection universe, the FTSE EPRA Nareit Developed Index, the fund’s prospectus says.
The methodology incorporates typical ESG screens such as excluding companies involved in the production of tobacco, weapons or thermal coal, and excluding companies that violate the United Nations Global Compact, which covers human rights, labor, environment and anti-corruption standards.
From there, companies are weighted based on their green certification levels, reductions in energy usage and carbon emission intensity, according to the document. The index rebalances annually.
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