BlackRock, Thomson Reuters launch new diversity and inclusion ETF

Index fund aims to go beyond single issues like gender and race to capture a broader spectrum of ESG initiatives

Sep 24, 2018 @ 1:57 pm

By Ryan W. Neal

BlackRock Inc. and Thomson Reuters are partnering on a new exchange-traded fund that invests in companies that promote diversity and inclusion practices.

The new iShares Thomson Reuters Inclusion & Diversity UCITS ETF (OPEN) tracks an index of 100 companies that have the most diverse and inclusive workplaces, according to a ranking of 2,000 publicly traded companies across developed and emerging markets.

The index aims to go beyond other environmental, social and governance ETFs that focus on one issue, such as gender or race, by capturing a broader spectrum of issues. Companies are measured by 24 metrics across four categories: diversity, inclusion, news and controversies, and people development.

(More: Making diversity intentional is first step to boosting inclusion)

Elena Philipova, global head of diversity at Thomson Reuters, said inclusive companies benefit from having a greater variety of ideas and viewpoints, and a corporate culture in which employees feel their voices are heard and make a difference.

"Within our corporate culture, we do see the benefits of building and flourishing an inclusive organization," Ms. Philipova said. "We've seen the financial benefits of doing so."

As the stigma that ESG investing sacrifices performance fades, more consumers are demanding these products. According to research from Cerulli Associates, 45% of all households across age and asset level prefer ESG investing.

(More: How to get investors excited about ESG ETFs)

"It's becoming vastly accepted that it's not coming at the expense of profitability," Ms. Philipova said. "It's a prerequisite of profitability."

The fund carries a total expense ratio of 25 basis points. According to a statement, the fund complements BlackRock's 10 thematic iShares providing "exposure to megatrends, or powerful, transformative forces that could change the global economy, business and society."

(More: Citigroup unveils plan to reverse its declining diversity)

Paul Gamble, CEO of 55ip, a technology firm that helps advisers design custom and automated investment strategies, said products like this ETF make it easier for advisers to implement ESG strategies because they remove the burden of researching the funds and help balance social responsibility with investment returns.

"As more of these come onto the market, it allows firms like ours to have better building blocks to work with," Mr. Gamble said. The products make it easier to match the investment exposure clients are looking for and use analytics on how ESG impacts portfolio performance. "From my perspective, it's another step for making ESG investing more actionable for end clients and advisers."

Dana M. D'Auria, managing director at Symmetry Partners, a turnkey asset management platform, noted that although interest in ESG investing has grown, "the lack of targeted investment options makes it a challenge for a lot of people.

"Everyone has different beliefs, so broad-based packaged products often do not meet the needs of the investors who, by the very nature of the demand, are looking to express their own unique views via their investment vehicle," Ms. D'Auria said.

Thomson Reuters' Financial and Risk unit, which developed the index, was recently acquired by private equity firm Blackstone Group for $20 billion. Once the deal closes, Blackstone will rename the unit Refinitiv. Ms. Philipova said Thomson Reuter's partnership will continue with BlackRock, and she expects to announceother ESG-based initiatives in the future.

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