The iShares MSCI World SRI UCITS ETF tracks the MSCI World SRI Select index, which combines positive screening based on MSCI’s ESG company ratings with excluding companies involved in severe controversies or in military weapons, civilian firearms, tobacco, alcohol, nuclear power, gambling, adult entertainment and genetically modified organisms.
The new tracker has a total expense ratio of 0.30%, 8 basis points less than the UBS MSCI World Socially Responsible UCITS ETF, which was launched in 2011 and had hitherto been the only available sustainable global equity ETF.
The price is not the only difference between the two trackers: the UBS ETF tracks the MSCI World Socially Responsible 5% Issuer Capped Index, meaning it has a maximum exposure of 5% to any single company. In practice, this relates to only one stock, Microsoft, which his big enough to have a more than 6% weighting in the iShares ETF.
What about performance?
With the launch, Blackrock is responding to a surge in interest for ESG/socially responsible investing. According to MSCI, $62bn (€53bn) is currently benchmarked to MSCI ESG indexes, with the bulk of this money coming from Europe.
The naturally high allocation of a global equity tracker to US equities is a bit of a handicap for SRI ETFs, however. While sustainable trackers have clearly outperformed their plain vanilla equivalents in almost all equity markets in recent years, they have underperformed in the US. The fact that the US accounts for more than half of the market cap of global equity SRI/ESG ETFs has been a significant drag on outperformance.