ETF TV News #69 Sarah Kjellberg discusses BlackRock’s new ESG ETF is the largest ETF launch

Dan Barnes: Welcome to ETF TV – your update on newly issued exchange traded funds and products. I’m Dan Barnes. Joining me today is Sarah Kjellberg, head of US iShares Sustainable ETFs at BlackRock, and Deborah Fuhr of ETFGI. Deborah, can I turn to you? First of all, welcome back to the show.

Deborah Fuhr: Thank you.

Dan Barnes: Can you give us an update on newly issued products that we saw over the previous week?

Deborah Fuhr: Last week was relatively quiet. We had 15 issuers launch 27 new products. There was also 21 cross-listings during the week on 10 different exchanges around the world.

Dan Barnes: Sarah, turning to you then. First of all, welcome to the show.

Sarah Kjellberg: Thank you. Thanks for having me.

Dan Barnes: So you have the honor of launching the largest ever ETF, could you tell us about the two new products the BlackRock launched, please?

Sarah Kjellberg: Sure. We’re very excited about these launches. And last week we launched LCTU and LCTD; these are low carbon transition readiness ETFs that provide exposure to US and World x-US, equity exposures. These are transparent, active, ETF that leverage a proprietary strategy, and it was developed by the BlackRock Sustainable Investing Team. I would say that unlike other existing strategies, these focus on both risks and opportunities, utilizing a variety of different data sources, including BlackRock’s own insights. It focuses on materiality to be able to seek to enhance long term financial and environmental outcomes.

You know, transition readiness strategy is an investment approach that measures companies’ exposures as well as its management to transition risks and opportunities. It overweights companies that are best believed to benefit from the transition and underweights those that are poorly positioned. You know, it’s important to also note that taking a transition approach means that you’ll own fossil fuel companies in your portfolio. It’s really designed to support this energy evolution, so it’s not a divestment approach. And so, these research-driven insights are then assigned a transition-readiness score across five different pillars. So, it’s looking at core business involvement in fossil fuels and clean technology, as well as resource management across energy, water and waste.

Deborah Fuhr: One product had 1.25 billion at launch, and I understand that you had significant interest from pension funds in the US and globally. Were you surprised of who came in as initial investors?

Sarah Kjellberg: I’m not surprised, and I would say the low carbon transition represents really a historic opportunity. And we’re already seeing record flows into sustainable strategies. And actually, the second largest ETF launch was an ESG ETF that we had launched with a Finnish pension just a few years ago. And so today we’re seeing a lot of real interest in action being taken by our clients, to integrate sustainability within their investment process. Most interesting, and Debbie, you alluded to this, was seeing really this representation across nearly every region globally.

Deborah Fuhr: Why are some non-US asset owners buying US-listed ETFs?

Sarah Kjellberg: At BlackRock, it’s been a real focus to create access, and this is really for investors all over the world, so meeting them on their sustainable journeys and providing greater choice, whether it’s US-listed ETFs or UCITS. We’ve significantly grown our platform globally, so going from just really a handful of ETFs and UCITS just a few years ago to now 140, and our commitment is to continue to grow that access. And we expect that by the end of this year we’ll reach our commitments that we laid out just a few years ago.

Deborah Fuhr: So, I guess wrapping up, what are your areas of focus for the rest of 2021?

Sarah Kjellberg: I would say it is very much focused on climate. So we will continue to work towards meeting the commitments that we’ve laid out, so we’re focused on climate and net zero as written in the letter that we published to clients earlier this year. In addition to these low carbon transition ETFs, it’s really about creating access to more climate-focused solutions and expanding ESG asset allocation, building blocks that are really central to portfolio construction. And then secondly, around thought leadership on climate; we published a climate white paper as well last week – it’s a sea change in global investing.

And then we’re also focused on creating more transparency around climate metrics across our ETFs. So, this includes adding temperature alignment across all of our ETFs, and more broadly at BlackRock with our funds. And then finally around analytics, so helping our clients think through climate risks and integrating climate-oriented metrics, when it comes to portfolio analysis. We’re also focused on making ESG portfolio analysis more broadly accessible to financial advisors in the US as we’re really starting to see the surge in demand for these types of resources.

Deborah Fuhr: That’s great. Thank you so much for joining us.

Sarah Kjellberg: Thank you.

Dan Barnes: Debbie, can you give us a bit more color on some of the new products that we saw launched over the previous week, please?

Deborah Fuhr: So, we had five new, digital asset products come to market, so we’ve really seen a focus on that globally. We’ve also seen 19 equity products, of which three were fixed income. Three of the products were active, including Vanguard bringing out an active fixed income ETF in the US. We had a number of China-focused products coming out in Japan, and in Korea, we had 10 new ETFs and interestingly, two are on the S&P 500, one is on NASDAQ, the others are giving exposure to some sectors. And then we have a new issuer, SEBA Bank. In the next day or two we will have our assets and flows at the end of March. And we think that the assets have grown to 8.5 trillion, which is a new record.

Dan Barnes: Wow!

Deborah Fuhr: And we think we will also have a record amount of net new assets ever into ETFs in Q1. So a lot is going on, because we’ve had a significant number of new launches and new listings this year.

Dan Barnes: Well, we’ll be waiting for the latest ETFGI update with bated breath. That’s been great, Debbie, thank you so much.

Deborah Fuhr: Thank you.

Published on April 13, 2021