Setting sun on horizon
BlackRock said the proposed index switch was being made in response to increased investor demand © AP

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BlackRock plans to switch a €1.4bn iShares corporate bond exchange traded fund to an environmental, social and governance index in response to investor demand.

The world’s largest asset manager has asked shareholders of its Dublin-domiciled iShares € Corp Bond ex-Financials Ucits ETF to approve an index change to the Bloomberg MSCI Euro Corporate ex Financials Sustainable SRI at an extraordinary general meeting on March 25.

The ETF, which launched in 2009, currently tracks the Bloomberg Barclays Euro Corporate ex-Financials Bond index.

The ETF will switch to the new sustainable index in mid-May, subject to shareholder approval, and will have an ESG tag added to its name.

This article was previously published by Ignites Europe, a title owned by the FT Group.

The proposed change means the ETF will in future be classified as an article eight fund under the EU’s Sustainable Finance Disclosure Regulation.

BlackRock said the proposed index switch comes in response to “increased investor demand for evolving the existing sub-fund to adopt ESG characteristics while maintaining its broad market exposure”.

“We believe that where enhancements can be made to improve the ESG characteristics of a portfolio while continuing to provide a similar or improved risk/return profile, such enhancements are in the best interest of investors,” the asset manager said.

BlackRock, which has about $10tn in assets under management, said no changes would be made to the total expense ratio of the ETF, which stands at 0.2 per cent.

The US mutual fund giant has changed indices on several iShares products. Rival asset managers such as DWS and BNP Paribas Asset Management have also switched benchmarks on some of their ETFs.

Fund selectors recently have expressed their doubts about passive funds changing indices to incorporate ESG factors.

Experts have warned that not all selectors are at the same point in their “ESG journey” and changing underlying indices could lead to a loss of trust.

*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at igniteseurope.com.

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