ESG on AGG

USA

BlackRock lists ESG bond ETF

As part of its wider global bear hug of ESG, BlackRock is listing a newly refined version of its $56bn aggregate bond ETF (AGG). The iShares ESG U.S. Aggregate Bond ETF (EAGG) will function essentially as an ESG version of the iShares Core U.S. Aggregate Bond ETF (AGG), which tracks the total investment grade US bond market. The index includes T-bills, agencies, CMBS, ABS andinvestment-grade corporates – all of which are market weighted.

The newly-added ESG screen will be run by MSCI and use positive and negative screens. The negative screen will exclude debts of companies involved in the business of tobacco, controversial weapons, retailers of civilian firearms, as well as those involved in very severe business controversies as determined by MSCI. It also identifies “key ESG issues that can lead to substantial costs or opportunities for entities (e.g., climate change, resource scarcity, demographic shifts),” and makes further cuts.

The positive screen involves MSCI rating “the extent to which entities have developed robust strategies and programs to manage ESG risks and opportunities.”

EAGG then employs a sophisticated mathematical model to ensure that sector exposures aren’t thrown too far out of whack by the ESG screen, while also ensuring that the optimized sampling baskets the ETF uses accurately track the index. The fund will charge 0.10%.