Market Overview

iShares Adds Another ESG ETF

iShares Adds Another ESG ETF

The universe of environmental, social and governance (ESG) exchange traded funds continues to grow. Last week, BlackRock Inc. (NYSE: BLK), parent company of iShares, added to its roster of ESG funds with the debut of the iShares ESG MSCI USA Leaders ETF (NASDAQ: SUSL).

What Happened

With the debut of SUSL, iShares now offers 10 ESG ETFs. There are just over 80 U.S.-listed ETFs that are classified as ESG or socially responsible funds. Five of the six largest funds in that category are iShares products.

“All iShares ESG funds also seek to track indexes that screen out civilian firearms, controversial weapons and tobacco,” according to the issuer.

SUSL tracks MSCI USA Extended ESG Leaders Index, which was home to 337 stocks at the end of the first quarter.

Why It's Important

“The MSCI USA ESG Leaders Index is a capitalization weighted index that provides exposure to companies with high Environmental, Social and Governance (ESG) performance relative to their sector peers,” according to MSCI. “MSCI USA ESG Leaders Index consists of large and mid cap companies in the US market. The Index is designed for investors seeking a broad, diversified sustainability benchmark with relatively low tracking error to the underlying equity market.”

SUSL is comparable to many legacy ESG ETFs in that the new iShares fund excludes alcohol and tobacco companies, civilian firearms manufacturers and companies with exposure to adult entertainment and gambling.

SUSL allocates nearly a quarter of its weight to technology stocks with the health care and financial services sectors combining for 24.83 percent of the fund's weight.

What's Next

MSCI's “ESG Leaders Indexes target sector and region weights consistent with those of the underlying indexes to limit the systematic risk introduced by the ESG selection process,” according to the index provider.

SUSL charges 0.15 percent per year, or $15 on a $10,000 investment, putting the new fund at the lower end of the fee spectrum among ESG ETFs. Last week, iShares also introduced five new junk bond ETFs.

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