Today, BlackRock’s iShares arm is rolling out a small-cap socially responsible ETF that is explicitly designed to exclude companies that manufacture and sell civilian firearms.
The iShares MSCI USA Small-Cap ESG Optimized ETF (ESML) is part of iShares’ larger ESG ETF family, which, in the wake of the school massacre in Parkland, Florida, has altered its methodology to entirely exclude makers of civilian firearms or any retailer that earns more than $20 million or 5% of their total revenue from the sale of civilian firearms.
ESML comes with an expense ratio of 0.17% and lists on Cboe Global Markets, the parent company of ETF.com.
The fund tracks the MSCI USA Small Cap Extended ESG Focus Index, which is derived from the MSCI USA Small Cap Index that represents the bottom 14% of the market capitalization of U.S. equities.
In addition to excluding companies involved with the production and sale of civilian firearms, the methodology also screens out companies that have business lines related to controversial weapons, tobacco or severe business controversies, according to the prospectus.
The overall methodology takes an industry-focused approach by identifying the important ESG-related issues that could give a company in the space an advantage or disadvantage. It rates each company based on its exposure to those identified issues and how it addresses them. Within each sector, companies are scored and weighted using this evaluation relative to their peers.
ESML is the fourth fund in iShares’ “ESG Optimized” family, which also includes the following:
- iShares MSCI EM ESG Optimized ETF (ESGE), with $288 million in assets
- iShares MSCI EAFE ESG Optimized ETF (ESGD), with $229.5 million
- iShares MSCI USA ESG Optimized ETF (ESGU), with $59.9 million
Contact Heather Bell at [email protected]