Rounding out its new line of socially responsible investment strategies, BlackRock’s iShares launched an Economic, Social and Governance, or ESG, exchange traded fund focused on U.S. companies.
BlackRock’s iShares united has come out with the iShares MSCI USA ESG Optimized ETF (NasdaqGM: ESGU). ESGU has a 0.28% expense ratio.
The new ETF tries to reflect the performance of the MSCI USA ESG Focus Index, which is an optimized equity index designed to reflect the performance of U.S. stocks taken from the MSCI USA Index that have positive environmental, social and governance characteristics.
As opposed to its parent index, the ESG Focus Index excludes securities of companies involved in the business of tobacco and controversial weapons companies, along with securities of companies involved in very severe business controversies, according to the prospectus sheet.
The customized index will also follow a quantitative selection process to exclude companies with unexpected costs in the mid- to long-term. The underlying index can calculate each company’s exposure based on business segment and geographic risk and analyzes the extent to which companies have developed strategies and programs to manage ESG risks and opportunities.
Current sector exposures include information technology 21.5%, financials 14.2%, health care 13.3%, consumer discretionary 11.5%, industrials 11.5%, consumer staples 8.8%, energy 6.8%, utilities 3.6%, materials 3.1%, real estate 3.1% and telecommunications 2.4%.
Top holdings include Apple (NasdaqGS: AAPL) 3.0%, Microsoft (NasdaqGS: MSFT) 2.7%, Exxon Mobil (NYSE: XOM) 1.9%, General Electric (NYSE: GE) 1.8% and Johnson & Johnson (NYSE: JNJ) 1.5%.
The targeted ETF strategy allows advisors and investors to bring ESG considerations into their investment portfolios. By targeting U.S. companies for their ESG outcomes, investors can incorporate their social values into the investment process while potentially generating improved risk-adjusted returns over the long haul.
The iShares MSCI USA ESG Optimized ETF joins the quickly growing socially responsible ETF investment category. BlackRock already offers two international ESG-related ETFs, including the iShares MSCI EAFE ESG Select ETF (NasdaqGM: ESGD), which tracks developed markets in Europe, Australasia and the Far East, and iShares MSCI EM ESG Select ETF (NasdaqGM: ESGE), which follows emerging market companies.
For more information on new fund products, visit our new ETFs category.