BlackRock Launches Biggest ETF Ever — and It’s Green

BlackRock Investment management company
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Institutional investors have put $1.25 billion into a new U.S. exchange-traded fund that aims to identify the companies that will succeed in a more climate-friendly world. The move makes it the largest ETF launch ever and undermines the recently surging demand for environmentally sustainable investment products, the Financial Times reports.

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The fund, launched by BlackRock and called The BlackRock U.S. Carbon Transition Readiness fund, will give investors new alternatives to “ESG” products that have been dominating the space.

ESG stands for environmental, social and governance and has become shorthand for sustainable investments. The demand for sustainable investing has surged in recent years, and analysts believe it will occupy a significant percentage of portfolios in the next five years.

According to BNP Paribas, “study after study has shown that companies’ approaches to these ESG pillars has a measurable impact on their financial performance, and this evidence has led to investors increasingly integrating ESG criteria into their investment processes.”

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Some common ESG products currently offered are ESG specific bonds, equities and portfolios investors can singularly buy into or add to existing portfolios.

ESG investments tackle issues like climate change, human rights, gender equality, company ownership and business ethics.

For example, HSBC’s ESG product, HSBC Global Investment Funds-Global Equity Climate Change, has holdings in corporations like Neste Corp. and Ecolab Inc. Neste is a company focused on making transportation and cities, and the chemicals and products used in those cities, more sustainable and eco-friendly. Ecolab Inc. specializes in water purification.

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The power behind BlackRock’s ETF product is that now investors will have the option to purchase investments like these in bulk through a specialized ETF.

Companies in the ETF are graded on a “carbon transition readiness” score. A higher prediction of carbon reduction will result in a company being overweighted in the ETF relative to other rivals in the sector, FT adds.

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The expectation is that companies transitioning to lower carbon emissions will outperform in the long-term and push other companies to transition to take advantage of the financial returns.

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

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