BlackRock To Launch Gun-Free ESG ETFs

April 06, 2018

New Gun-Free Bond ETF

BlackRock has also filed for a new fixed-income ETF based on a Bloomberg Barclays index that will select bonds based on the MSCI ESG ratings of their issuing companies.

The iShares ESG US Aggregate Bond ETF, for which there is no ticker or expense ratio yet named, would also explicitly exclude bonds from all civilian firearms makers and large gun retailers.

The ETF's benchmark would track investment-grade bonds, including Treasuries, government-related bonds, corporate bonds, mortgage-backed securities and more. Its goal is to provide risk and returns similar to that of the Bloomberg Barclays US Aggregate Bond Index, a popular U.S. fixed-income benchmark, while using only ESG-friendly issues.

That makes it essentially a gun-free version of the iShares Core U.S. Aggregate Bond ETF (AGG), which has no positions in bonds from Sturm, Ruger & Co., American Outdoor Brands Corp. or Vista Outdoor Inc.

Subject to approval, the new bond ETF would launch later this year.

Fees For DSI, SUSA Slashed

At the same time, BlackRock is also halving expenses for its best-known ESG ETFs, DSI and SUSA, bringing their net expenses down to just 0.25%. The lower operating expense, which is effective immediately, is achieved through a fee waiver that will remain in place until April 5, 2020.

The lower fees would position them well below the average expense ratio for all ESG ETFs, which is 0.46%.

DSI and SUSA are the two largest ESG ETFs, with $993 million and $661 million in assets under management, respectively.

Lately they've also been a popular choice for investors looking to go gun-free: In the seven weeks since the Feb. 14 mass shooting, DSI alone has taken in $50 million in new net inflows, the most of any ESG ETF. SUSA, meanwhile, has pulled in $17 million.

New Civilian Firearm Screens

Finally, BlackRock is also changing the underlying indexes for all its existing ESG ETFs to include explicit screens for civilian firearms manufacturers and retailers.

Affected products include SUSA, SUSB and ESGU, as well as the iShares ESG USD Corporate Bond ETF (SUSC), the iShares MSCI EAFE ESG Optimized ETF (ESGD) and the iShares MSCI EM ESG Optimized ETF (ESGE).

These funds already screen out makers of controversial weaponry, such as bioweapons or landmines. However, the ETFs will now also explicitly screen out all makers of civilian firearms, as well as any retailer that earns either $20 million in revenue or 5% or more of their total revenue from civilian firearms or related products.

Gun-Free 401(k)s

Though it is not an ETF-specific move, BlackRock will also offer a new line of gun-free products specifically for institutional investors, including U.S. pension plans such as 401(k) plans.

"BlackRock manages money for a diverse set of investors, including pension plans, insurers and individual investors, who have a wide range of views on firearms," said BlackRock about the moves in the statement. "It is ultimately our clients’ choice about the types of funds they invest in."

Contact Lara Crigger at [email protected]

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