BlackRock Removes ESG from European Funds Worth $51B

BlackRock Inc. (BLK) has renamed or changed the methodology of 135 ETFs and funds in response to a “client-informed approach” to European Securities and Markets Authority (ESMA) fund-naming guidelines.

The changes will see the world’s largest asset manager remove the "ESG" moniker from its iShares MSCI ESG Screened UCITS ETF range and BSF Systematic ESG World Equity Fund, comprising 51 strategies housing $51 billion of assets under management (AUM).

ESG Decision

The decision to remove ESG from its "light green" offering was made in response to client feedback expressing a preference for changing the name rather than the methodology of the strategies. The ETF range will continue to be classified Article 8 under the Sustainable Finance Disclosure Regulation (SFDR).

Elsewhere, its "middling" green suite of 18 strategies housing $42 billion of AUM will signal clearer alignment with climate transition objectives.

The MSCI ESG enhanced ETF range will feature the Climate Transition Benchmark (CTB) acronym, and disclosure language will be updated for the BGF European Equity Transition Fund.

Finally, 60 "dark green" strategies housing $92 billion of AUM will begin implementing Paris Aligned Benchmark (PAB) exclusions.

The SFDR Article 9 products that will begin including PAB criteria are the BGF ESG Multi-Asset Fund and the iShares MSCI SRI UCITS ETF range.

No changes will be made to 17 funds in BlackRock's sustainable range, including its PAB suite housing just under $5 billion.

New Rules

The updates precede ESMA’s naming rules coming into effect on May 21, requiring EU funds to fulfill additional criteria to include ESG and other sustainability-related terms in their names.

In a note to clients seen by ETF Stream, the firm said, ”To adapt to these changes and refresh our European product range, we consulted with a significant number of clients, including large distributors, product selectors and portfolio managers, to seek their views and understand their preferences.

“Based on this feedback, we have focused on providing clients with transparency and, where relevant, retaining investment methodologies consistent with their preferences.”

Rename, Rebrand, Remove

The updates coincide with similar moves by other fund promoters in Europe. MSCI found that by the end of February, the number of sustainability-named funds had already fallen around 20% since ESMA’s naming guidelines were published last May.

Around 84% of Europe’s sustainable fund roster is impacted based on a "stringent" interpretation of the guidelines, according to research by ISS STOXX.

While asset managers have updated product methodologies where feasible, the direction of travel to-date expresses a preference for renaming rather than overhauling the strategies of "light green" ESG offerings.

BNP Paribas Asset Management removed "ESG" from one of its S&P 500 ETFs following similar moves by DWS and State Street Global Advisors (SSGA).

Elsewhere, UBS Asset Management and DWS rebranded dozens of ETFs after MSCI renamed over 100 ESG indices.

This article was originally published at etf.com sister publication ETF Stream.