The world’s largest investor BlackRock has unveiled two new temperature-based exchange funds aimed at helping investors align portfolios with the pathways of the Paris Agreement.
BlackRock had launched the iShares S&P 500 Paris Aligned UCITS ETF (UPAB) and the iShares MSCI World Paris Aligned UCITS ETF (WPAB) exchange traded funds (ETFs) with the aim of helping investors mitigate against the climate crisis.
The funds are designed to mitigate financial exposure to both physical climate risks and transitional risks as the globe moves towards a low-carbon economy. As such, the products assist investors in screening out exposure to fossil fuels, controversial weapons, high carbon electricity generation, and social norm violators.
The funds meet the minimum standards of the EU Paris Aligned Benchmark label, an investment benchmark that incorporates criteria related to emissions reductions, and are categorised as Article 9 under the European Union’s Sustainable Finance Disclosure Regulation (SFDR), which applies to investment projects that have sustainability as a key objective.
BlackRock’s head of sustainable indexing EMEA Manuela Sperandeo said: “As the low-carbon transition continues to transform market return expectations, we believe clients are best served by being at the forefront of that transition.
“This will require investors to embrace new strategies, and ETFs are playing a central role as foundational building blocks for people seeking out affordability, transparency, and convenience. Our focus remains on providing a broad and deep set of sustainable investment tools that help investors make informed choices.”
With the introduction of the new funds, BlackRock’s iShares Sustainable UCITS range has surpassed $50bn in assets, with $10bn arriving in the first quarter of 2021, almost tripling the pace of allocated funds a year prior.
More broadly, BlackRock now manages more than $200bn in long-term sustainable strategies, more than double what was recorded at the end of March 2020.
BlackRock has also forged a new partnership with Singapore-based Temasek to scale up investment in low-carbon technologies.
Called ‘Decarbonization Partners’, the partnership has committed to initially invest a combined $600m in initial funds, that will be used for late-stage venture capital projects and existing early growth equity private funds. Funding will be raised by third parties as well as from Blackrock and Temasek’s own teams. Beyond the initial $600m, the partnership believes it can raise $1bn.
Commenting on the announcement, Remy Briand, Head of ESG at MSCI said: “The MSCI Paris Aligned Benchmark Select Indexes are intended to support the needs of investors with investment strategies that aim to mitigate climate transition and physical risks through the decarbonization of the economy while being compatible with the Paris Agreement.
“MSCI recently called on asset managers to scale up the availability of investment options aligned with a net-zero trajectory as a means to accelerate the flow of capital for the net-zero revolution. We believe this will help tackle the single greatest challenge humankind has faced and ignite a new era of sustainable growth.”
MSCI recently announced its intention to reach net-zero emissions before 2040, pledging to revamp its current decarbonisation goals and align with the recommendations of the Taskforce on Climate-Related Financial Disclosures (TCFD).