BlackRock has launched a new ETF in the US providing exposure to US companies that are leading their sector peers in terms of readiness for the climate transition.
The ETF provides sector-diversified exposure to US companies exhibiting the greatest readiness for the climate transition.
The iShares Climate Conscious & Transition MSCI USA ETF (USCL US) has been listed on Nasdaq, coming to market with initial assets of $2.2 billion.
The fund is linked to the MSCI USA Extended Climate Action Index which is based on the parent MSCI USA universe of large and mid-cap stocks listed in the US.
The methodology first screens out companies embroiled in severe ESG-related controversies as well as firms with business activities linked to controversial and nuclear weapons, civilian firearms, tobacco, thermal coal, and oil sands.
Additionally, companies with very high carbon emissions or potential carbon emissions (those that rank in the worst 5% of the global MSCI ACWI universe), as well as firms that are deemed to be taking a poor approach to key issues related to climate change (those that rank in the worst 25% of their GICS sector) are excluded.
The remaining securities are then assigned ‘Climate Transition’ scores derived from four metrics: carbon emissions intensity, emissions reduction commitments, climate risk management strategies, and revenue from greener businesses.
The index selects 50% of the number of securities from each sector of the parent universe, choosing those with the highest Climate Transition scores.
Constituents are weighted by float-adjusted market capitalization subject to an individual security cap of 5%. Additionally, any individual GICS sector is not allowed to deviate by more than 5% from its weight in the parent universe.
The index is reviewed semi-annually with buffer rules helping to limit unnecessary turnover.
As of the end of May, the index’s sector allocation was led by information technology (31.4%), health care (15.9%), consumer discretionary (12.8%), communication services (12.4%), and financials (9.2%).
Notable positions included Microsoft (6.6%), Alphabet (5.8%), Apple (5.6%), Amazon (4.5%), and Nvidia (3.8%).
The ETF comes with an expense ratio of 0.08%.