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BlackRock Plans 2 ETFs That Exclude Gunmakers

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BlackRock Plans 2 ETFs That Exclude Gunmakers
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BlackRock, Inc. (NYSE: BLK), the parent company of iShares, the world's largest issuer of exchange traded funds, said it is expanding its suite of environmental, social and governance ETFs to include funds that exclude makers of civilian firearms.

Last month, BlackRock outlined its efforts to accommodate client demand for funds that exclude gunmakers as well as the asset manager's efforts to enhance dialogue with gun manufacturers and retailers. BlackRock said some publicly traded gunmakers account for scant percentages of its passively managed ETFs and that its actively managed funds liquidated positions in such stocks following a Feb. 14 school shooting in Parkland, Florida that left 17 dead. 

“We have reached out to our clients to help them understand their exposure to civilian firearms companies,” BlackRock said last month. “We have a continuing dialogue with many clients and are helping them explore their options for altering or eliminating their firearms exposures.”

More Details

On Thursday, BlackRock said it could launch a new small-cap ETF as soon as next week that excludes shares of civilian firearms manufacturers. The iShares MSCI USA Small-Cap ESG Optimized ETF (ESML) will follow the MSCI USA Small Cap Extended ESG Focus Index.

That index “is composed of small-cap U.S. companies that have favorable ESG characteristics, and also will exclude all producers and large retailers of civilian firearms,” according to BlackRock.

As of the end of the first quarter, that index held almost 900 stocks and excluded gunmakers as well as tobacco companies.

Bonds, Too

BlackRock also filed plans for an ESG ETF, the iShares ESG US Aggregate Bond ETF. It's expected to launch later in 2018.

“This proposed ETF will be based on a new index by Bloomberg Barclays, with ESG rating inputs from MSCI ESG Research, and that excludes all producers and large retailers of civilian firearms,” said BlackRock. “The underlying index that this ETF will seek to track is an optimized fixed-income index designed to reflect the performance of U.S. dollar denominated investment-grade bonds issued by companies evaluated for favorable ESG characteristics, while exhibiting risk and return characteristics similar to those of the Bloomberg Barclays US Aggregate Bond Index.”

BlackRock added that it will apply new screens to some of its existing ESG ETFs that will block retailers from entering the funds "if they earn 5 percent or more in revenue, or more than $20 million in revenue, from civilian firearms-related products.”

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