BlackRock is relaxing several ESG exclusion rules across its MSCI climate ETF range and enhanced active ETF suite, aiming to broaden investment opportunities and improve benchmark tracking.
The asset manager said the adjustments were driven by client feedback seeking a “rethink” of how sustainability characteristics are balanced with investment potential in the enhanced active ETF lineup. For the MSCI Climate Transition Benchmark (CTB) ETFs, the changes are intended to tighten tracking alignment between ESG indices and their parent benchmarks.
Across the eight-fund MSCI ESG Enhanced CTB range — including the $6.5bn iShares MSCI World ESG Enhanced CTB UCITS ETF (EEWD) — the revised methodology will expand the investable universe while remaining aligned with EU Climate Transition Benchmark requirements. MSCI will now apply more consistent greenhouse gas intensity metrics covering Scope 1, 2 and 3 emissions.
While core exclusions for nuclear weapons remain, restrictions on support services and dual-use components will be lifted for both ETF suites. Civilian firearms exclusions have also been eased to target only producers of automatic or semi-automatic weapons and small-arms ammunition for civilian use.
According to BlackRock, the changes will add around eight additional stocks to the MSCI Europe exposure within the CTB range.
For the enhanced active ETF suite, the looser screening criteria will widen the pool of eligible companies while maintaining Article 8 classification under the EU Sustainable Finance Disclosure Regulation (SFDR).
The move comes after BlackRock dropped the “ESG” label from 56 funds holding $51bn earlier this year, following updated naming guidelines from the European Securities and Markets Authority (ESMA). The firm also added Paris-Aligned Benchmark (PAB) exclusions to 60 strategies representing $92bn.
