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BlackRock launches Europe’s first ESG high yield bond UCITS ETFs

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BlackRock has launched the iShares € High Yield Corp Bond ESG UCITS ETF (EHYD) and the iShares USD High Yield Corp Bond ESG UCITS ETF (DHYD), to offer investors a larger toolbox to reflect their sustainability objectives.

A confluence of factors in Europe including country-level legislation, growing societal awareness, better data and the investor community’s evolving demographic is driving the integration of ESG aspects into traditional investment approaches.  In addition, global bond ETF assets topped USD1 trillion in June 20191. We’re optimistic about the future and believe that global bond ETF assets can double, to USD2 trillion by 20242, of which USD50 billion is predicted to be in EMEA fixed income ESG.

The two new funds will enable investors to achieve a more sustainable high yield exposure through debt issued by companies with the strongest commitment to ESG, while also screening out companies involved in controversial business activities. The funds will track the Bloomberg Barclays MSCI Euro Corporate High Yield SRI and Sustainable BB+ Bond Index and the Bloomberg Barclays MSCI US Corporate High Yield SRI and Sustainable BB+ Bond Index respectively. The high-yield ESG benchmarks deliver an ESG score uplift as well as carbon emissions reduction, compared to standard parent benchmarks.
 
Meaghan Muldoon, Head of Sustainable investing EMEA at BlackRock, says: “As evidence increasingly shows that sustainability-related factors can help investors build more resilient portfolios, we are moving into an era where sustainable investing will be the standard way to invest. Our commitment at BlackRock is to provide the choice of products that allow investors at different stages of this journey to allocate to different markets efficiently and without paying a premium. Against a backdrop of a search for yield, and enhanced coverage across the credit and geographic spectrum, more and more investors can now invest in fixed income strategies while meeting their sustainability goals.”
 
Brett Olson, Head of iShares Fixed Income EMEA, says: “While the conversation around sustainability started out in equities, innovation in ESG bond indices is picking up pace and with it the ability to build ESG-centered multi-asset portfolios. In tandem, bond ETFs themselves are becoming ubiquitous as efficient tools for all types of investors. These two factors make this asset class ripe for future growth.
 
Both ETFs will have a total expense ratio of 0.50 per cent, the same as corresponding iShares ETFs in € and USD high yield with no ESG screens.

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