BlackRock Launches Two New Carbon Transition ETFs Underpinned by Proprietary Climate Analytics
BlackRock launched two active sustainable ETFs this Thursday for the transition to a low-carbon economy. The two funds raised more than $1.5 billion, highlighting the increased focus on climate-aware strategies from global institutional investors. The BlackRock U.S. Carbon Transition Readiness ETF (LCTU) and the BlackRock World ex U.S. Carbon Transition Readiness ETF (LCTD) invest in large- and mid-cap companies, tilting toward those companies that BlackRock believes are better positioned to benefit from the transition to a low-carbon economy. The day-one investments into LCTU make it the largest ETF launch ever.
“The energy transition is central to all companies’ growth. Winners and losers will emerge in every sector based on each company’s ability to adapt, innovate and pivot their strategies toward the low-carbon economy,” said Larry Fink, Chairman and CEO of BlackRock. “Many of our clients share this conviction and we are helping them be at the forefront of the energy transition through next generation climate analytics and sustainable strategies. We believe that this combination will lead to better outcomes for them and society as a whole.”
The new ETFs seek to outperform their benchmarks over the long term by investing in companies that may be better positioned for the transition to the low-carbon economy. To capitalize on the energy transition, BlackRock’s Sustainable Investing unit developed and managed a proprietary strategy with institutional investors since 2018. The funds leverage a range of structured and unstructured data sources, advanced analytics and research-driven insights across five “pillars” (Fossil Fuels, Clean Technology, Energy Management, Waste Management, and Water Management) to derive a unique low-carbon economy transition readiness score for each company. For the two new funds, BlackRock systematically overweights or underweights individual companies relative to a benchmark based on their low-carbon economy transition readiness score. LCTU is benchmarked to the Russell 1000 Index and LCTD is benchmarked to the MSCI World ex USA Index.
Investors Leading the Transition
A consortium of global institutions invested in the funds, including the California State Teachers’ Retirement System (CalSTRS), Temasek, Sura Asset Management, Varma Mutual Pension Insurance Company, Profuturo Group, FM Global and RenaissanceRe. More than $1.2 billion flowed into LCTU making it the largest ETF launch of all time. Additionally, approximately $500 million was invested in LCTD, making it one of the largest ETF launches in history.