BlackRock launches global aggregate bond ESG ETF
Increased demand from investors to incorporate ESG into their fixed income portfolios continues to drive the transition from traditional fixed income ETFs into sustainable exposures, writes BlackRock.
The firm has launched the iShares Global Aggregate Bond ESG UCITS ETF (AGGE) designed to support investor requirements for an ESG version of the iShares Core Global Aggregate Bond UCITS ETF. The fund, which tracks the Bloomberg MSCI Global Aggregate Sustainable and Green Bond SRI Index, offers broad, diversified exposure to the global bond market across 70 countries and over 30 currencies.
AGGE offers an improved sustainability profile compared to the Bloomberg Global Aggregate Index whilst seeking to maintain a similar risk return profile. The index adopts a best-in-class approach to sustainable investing incorporating a series of ESG and business involvement screens as well as excluding issuers with an MSCI ESG rating lower than BBB. Exclusions are also applied to Sovereign and government related bonds based on the UN sanctions list resulting in a bond universe of 20,000 securities vs 27,000 in the parent index.
Additionally, the index also aims to achieve a measurable environmental impact by allocation at least 10 per cent of its market value to securities classified as green bonds Brett Olson, Head of Fixed Income iShares in EMEA for BlackRock says: “As the shift to sustainable investing continues to accelerate, we have seen strong demand – from across client segments - for a sustainable global aggregate exposure. Many investors transitioning their fixed income allocations are embracing indexing due to the diversification, transparency and efficiency that ETFs provide. We believe the iShares Global Aggregate Bond ESG ETF meets investors’ needs for a diversified global fixed income investment grade-rated building block, whilst also offering improved sustainable characteristics.”
BlackRock writes that the fund offers clients a cost-efficient way to instantly access the global bond market with investors able to get access to almost 20,000 bonds from 3,000 issuers via a single trade for an expense ratio of 0.10 per cent. AGGE is also offered in multiple currency hedged share classes. The launch supports BlackRock’s expectation that 70 per cent of its fund launches and re-positionings in Europe in 2021 will be Article 8 or 9 compliant under the European Union’s Sustainable Finance Disclosure Regulation (SFDR). AGGE is categorised as Article 8.