BlackRock plans to rebrand three impact investment funds with exposure to tobacco and oil, as it launches its first impact investment fund advancing the UN SDGs.
The move follows criticism of the funds for holding stock such as Chevron and British American Tobacco.
In a note published this week, BlackRock said the $124.4m BSF Impact World Equity Fund will now be called the BlackRock Systematic ESG Equity Fund as “categorisation of ESG products has developed since the Fund launched in 2015”.
The note said marketing for the fund will no longer use the term “positive societal impact” and instead refer to “systematic ESG methodology”. The fund will also now apply additional ESG screens meaning companies may be excluded if they have a certain level of exposure to controversial weapons, firearms, tar sands, tobacco and thermal coal. It will also exclude companies not meeting the terms of the UN Global Compact.
A BlackRock spokeswoman told RI that the $12.3m BlackRock Impact US Equity Fund has been repositioned and renamed to the BlackRock Advantage ESG US Equity Fund and the $7.7m BlackRock Emerging Markets Equity Impact Fund is expected to have screens applied and be renamed in a similar way.
The news comes as BlackRock this week launched an active equity impact strategy focused on the Sustainable Development Goals. The BlackRock Global Impact Fund claims to be based on the 169 underlying targets of the SDGs.
“We strongly differentiate between SDG alignment and SDG advancement. The fund invests in companies that are changemakers and we engage to make sure they bring about those changes,” said the fund’s portfolio manager, Eric Rice, who is BlackRock’s Head of Active Equities Impact Investing at BlackRock.
The Fund holds around 45 stocks and is benchmarked against the MSCI ACWI. It has a set of impact criteria for portfolio companies including:
- Materiality – whereby a majority of revenues or business activity advances one or more of the SDGs or targets;
- Additionality – defined as delivering a new technology or innovation to market, serving an underserved population, or operating in an unaddressed market; and
- Measurability – in that the impact must be quantifiable.
Rice said the fund will also conduct “impact engagement” to drive portfolio companies to have more impact over time, and to help improve data provision on impact. They will also engage with companies that fall slightly short of meeting the impact standards, advising them on how they might improve.
Investments currently include companies that are seen to be contributing to tackling COVID-19. Rice pointed to a healthcare company developing quick tests for coronavirus and another developing a vaccine; and a telecoms company providing free information on coronavirus to users.
“Launching the fund during the COVID-19 pandemic has further highlighted the important role companies play in society,” said Rice. “COVID-19 is one of the greatest societal challenges the world faces right now, and we see impact investing playing a meaningful role in how we overcome it.”
The Global Impact Fund will align with the World Bank’s IFC Operating Principles for Impact Management, committing to annual public disclosure of how they implement them, with independent verification. BlackRock’s $1bn Renewable Power Fund and $53m Green Bond Fund will also align with the Principles.