Global investment firm and ETF provider BlackRock is seeing an opportunity with climate change.
BlackRock has launched a sovereign bond ETF. It is designed to weight countries on their level of risk from climate change. It’s moving the debate over sustainable investment into the political sphere.
In the new ETF, government debt from Germany, Spain, the Netherlands, Belgium and Ireland will be underweighted. That is because of their higher greenhouse gas emissions or greater exposure to climate change risks.
The iShares € Govt Bond Climate Ucits ETF (SECD) on Monday, began trading on Frankfurt’s Xetra bourse. It is designed to help fill the void, a financial report noted.
Scott Harman, head of fixed income product management at FTSE Russell said, climate change could significantly impact government finances. They have argued that there is a link between climate change and creditworthiness.
The beneficiaries of a rise in ESG have been the equities. But BlackRock is hoping to see more focus on ESG within government bonds.
It seems, investors considered climate risk from an equity or corporate debt perspective. That is despite the average allocation to government bonds in client portfolios being around 17%. This was a statement from Brett Olson, head of iShares fixed income, Emea, at BlackRock.
Consequently, investors have overlooked the impact of climate change on their portfolios. And that’s without a robust solution to addressing climate risk within their government bond allocation, Olson added.
Meanwhile, investors seeking ESG exposure via an ETF wrapper can check the Xtrackers MSCI EAFE ESG Leaders Equity ETF (EASG). EASG seeks investment results that generally correspond to the MSCI EAFE ESG Leaders Index performance.
At least 80% of its total assets will be invested by the fund in component securities of the underlying index. The underlying index is a capitalization-weighted index. It gives exposure to companies with high ESG performance relative to their sector peers.
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