ENANCE YOU CORE WITH ESG
Broad market ESG ETFs for a sustainable core
- Access to traditional core exposures with a stronger focus on the companies with the strongest environmental, social and governance (ESG) factors characteristics.
- Our ESG Enhanced range of ETFs offer the same screens as our ESG Screened range and also include a screen for companies with severe controversies.
- Targeting a limited tracking error to traditional benchmarks, iShares MSCI ESG Enhanced ETFs could offer a good substitute in model portfolios.
- Each fund targets a 30% carbon reduction compared to its traditional exposure counterpart.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor may not get back the amount originally invested.
Unless otherwise stated, all information is sourced from MSCI and is correct as at 31 December 2018.
Why take an enhanced approach?
Enhanced ESG score
Reweights securities to
maximise ESG score
Target tracking error
Designed for your core:
Developed Markets: 50bps
Emerging Markets: 100bps
Carbon & GHG intensity reduction
30% carbon & greenhouse
gas (GHG) intensity (sales)
reduction1
1 Weighted Average Carbon Emissions Intensity measured by metric tons of carbon emissions emitted per million dollars of revenue.
How does the optimisation process work?
The MSCI ESG Enhanced Focus Index range is designed to maximise exposure to companies with positive ESG characteristics while reducing a fund’s carbon intensity and maintaining a similar risk and return profile to traditional broad benchmarks.
Explore the steps below to understand the methodology of how the indices are constructed.
Screens
Just like the iShares range of ESG Screened ETFs, the ESG Enhanced Focus index range excludes companies which have high potential for negative social and/or environmental impact:
A. Business Exclusion Criteria
Companies deriving 5% or more revenue from business practices linked to sales and production of thermal coal or oil sands.
Companies deriving revenues from controversial weapons, nuclear weapons, civilian firearms and tobacco.
Companies violating the United Nations Global Compact principles.
B. Companies With Severe Controversies
Any ongoing controversy regarding a company's operations or products is assessed for the severity of its impact on society or the environment and consequently rated Very Severe, Severe, Moderate, or Minor. Companies involved in Very Severe business controversies are excluded from the investible universe.
Constraints
The optimisation process aims to maximise exposure to positive ESG scores and simultaneously reduce carbon emissions intensity and potential emissions using the following constrains:
1. Tracking Error target
Performance of each index has a target tracking error relative to its parent index.
Developed Markets: 50bps
Emerging Markets: 100bps
This figures represent ex-ante tracking error targets.
2. Carbon & greenhouse gas (GHG) intensity
The indices target a 30% reduction of carbon emissions intensity (annual carbon emissions divided by annual sales) and potential GHG emissions from fossil fuel reserves (potential carbon emissions divided by market capitalisation.
3. Controls for sector, country, min/max stock weight & turnover
The indices aim to be sector-diversified and target companies with high ESG ratings in each sector.
iSHARES MSCI ESG ENHANCED ETFs
Build a sustainable core across key markets and asset classes with iShares MSCI ESG Enhanced ETFs.
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy.