Wildfire Smoke Sparks Interest in BlackRock’s ESG Fund

Smoke from Canadian wildfires draped the world’s financial center in a dangerous haze this week, and may have sparked a significant move into the largest environmentally focused exchange-traded fund. 

The $13.9 billion iShares ESG Aware MSCI USA ETF (ESGU) brought in $174.5 million on June 7, the same day New York City’s George Washington Bridge appeared in news photos to disappear into an amber fog. 

Whether or not the record-setting poor air quality caused the flows is up for debate, according to Elisabeth Kashner, FactSet's director of ETF research. “There's no way to measure what investors might be thinking,” she wrote in an email. 

Still, the move stemmed weeks of outflows for the beleaguered environmental, social and governance fund, which has lost more than $1 billion in assets since the beginning of April. 

Deborah Fuhr, founder and owner of ETF research firm ETFGI, and a member of etf.com’s editorial advisory board, said the episode “is likely a contributing factor.” 

“It seems unbelievable that the news is telling us that New York City has the worst air in the entire world,” Fuhr wrote in an email. 

The winds that blew the wildfire smoke over Manhattan and much of the East Coast may have revived the debate over using investments as a tool to fight climate change.  

Those opposing ESG investing appear to have the momentum as of late: U.S. states are forbidding pensions from putting money into clean climate investments, and the Senate in March approved a measure—vetoed by President Biden—that would have limited ESG investing. 

BlackRock Inc. is also reportedly boosting security for CEO Larry Fink, whose endorsement of a Wall Street role in combating pollution has led to protests against the world’s largest asset manager. 

ESG funds’ performances have been mixed over the past year, with many of the larger funds reporting modest-to-large gains. Still, ETF investors are not giving up on ESG investments. 

On a 52-week basis, some lead the broader markets. ESGU’s 4.6% return beats the 4.4% gain in the SPDR S&P 500 ETF Trust (SPY), as does the iShares ESG Aware MSCI EAFE ETF (ESGD) at 7.5% and the Vanguard ESG U.S. Stock ETF (ESGV) at 6.5%. 

Maybe the episode will be forgotten by this weekend, as air quality indicators fall back into the safe green zone and Wall Street’s air stops registering readings akin to those in Lahore and Shanghai. 

Contact Ron Day at [email protected] or follow him on Twitter at @RonDayETF