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iShares Enters Ethical Investing Space With Two New ETFs

Wendy Spires, Group Deputy Editor, London, 1 March 2011

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iShares, the exchange-traded funds business of the US asset manager BlackRock, has launched a pair of sustainable ETFs on the London Stock Exchange.

The firm says the launches are a response to high demand for funds which invest in line with environmental, social and governance criteria, such as avoiding companies with poor records in areas such as carbon emissions or employee working conditions.

The two vehicles, the iShares Dow Jones Global Sustainability Screened fund and the iShares Dow Jones Europe Sustainability Screened fund, invest in companies performing well against the Corporate Sustainability Assessment performed by Zurich-based Sustainable Asset Management. This selection process judges companies against industry-specific ESG criteria, and there is an additional element of negative screening, filtering out those involved with alcohol, tobacco, gambling, weapons and adult entertainment.

Socially responsible investing has been gaining traction as a credible investment approach over recent years, as investors increasingly seek ways to manage their money that fits their personal values. Proponents additionally say it isn’t actually necessary to trade off attractive levels of returns in order to satisfy ethical considerations, as companies with solid ESG records tend to be less risky over the long term.

The figures would certainly seem to bear out the rising popularity of SRI vehicles: according to iShares, the SRI sector represented €5 trillion ($6.9 trillion) in assets under management in Europe at the end of 2009, up 87 per cent from 2007.

Critics of SRI vehicles argue that methodologies such as negative screening leave investors with too narrow an investment universe, but iShares is keen to emphasise that its two new ETFs employ an approach combining positive screening and sector exclusion which will give investors broader exposure.

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