”Investing in the future with megatrends and explore how you can invest sustainably” (Maarja Vaikla ja Isabella Chami, iShares by BlackRock)
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The document provides information about investing in megatrends using sustainable ETFs. It begins with an agenda that outlines what will be covered, including what an ETF is, why investors use ETFs, and how to invest in megatrends with sustainable ETFs. It then defines ETFs and explains their popularity due to features like diversification, cost effectiveness, transparency, and flexibility. The document discusses thematic investing in megatrends like climate change, demographics, technology and urbanization using sustainable ETFs, and outlines the growth of sustainable funds and expected growth in sustainable ETF assets.
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”Investing in the future with megatrends and explore how you can invest sustainably” (Maarja Vaikla ja Isabella Chami, iShares by BlackRock)
- 1. BLACKROCK / NORDNET INVESTING IN MEGATRENDS WITH SUSTAINABLE ETFS Maarja Vaikla & Isabella Chami Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested. EIIH1219E-1032866-1/52
- 2. 2 AGENDA 1. What is an ETF? 2. Why are investors using ETFs? 3. How can you invest in megatrends with sustainable ETFs? EIIH1219E-1032866-2/52
- 3. WHAT ARE EXCHANGE TRADED FUNDS (ETFS)? Source: BlackRock, for illustrative purposes only. Diversified Open-ended Liquid and tradable during the day Diversified funds that trade on exchange and are open ended ETFs Exchange traded securities Mutual fund ETFs are funds that hold a portfolio of securities (like a mutual fund*) but trade on an exchange Capital at Risk. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. Diversification and asset allocation may not fully protect you from market risk. *A mutual fund is a pooled investment fund that invests in securities like stocks, bonds, money market instruments, and other assets. . EIIH1219E-1032866-3/52
- 4. INFORMATION ABOUT ETFS TAKE UP MORE AND MORE SPACE IN OUR DAILY NEWS FLOW... 4 Source: IPE.com; Borsen.dk; Svd.se; Berlinske.dk EIIH1219E-1032866-4/52
- 5. WHY ARE ETFS SO POPULAR? ETFs are index funds listed and traded like a stock on major stock exchanges globally Like an index fund Like a stock ETFs • Investors can generally see the ETF composition at any given time Transparency • ETFs offer a cost-effective route to diversified market exposure Cost-effective • ETFs offer immediate exposure to a basket or group of securities for diversification through a single trade Diversification • ETFs are listed on exchanges and can be traded at any time the market is open Flexibility ETFs offer two sources of liquidity Additional liquidity Capital at risk. All financial investments involve an element of risk. Therefore, the value of a client’s investment and the income from it will vary and the client’s initial investment amount cannot be guaranteed. Diversification may not protect against market risk. Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. The tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Source: BlackRock. For illustrative purposes only. EIIH1219E-1032866-5/52
- 6. THEMATIC INVESTING – HOW TO INVEST IN MEGATRENDS WITH ETFS? EIIH1219E-1032866-6/52
- 7. What is a Thematic Fund? 7 BLACKROCK VIEW: that: Redistributes industry profit pools driven by… The Megatrends thereby: Impacting a wide range of companies A Fund that invests in… A global, structural change Source: BlackRock, 30 September 2019. For illustrative purposesonly. What is a ThematicFund? EIIH1219E-1032866-7/52
- 8. MEGATRENDS Climate change and resource scarcity Demographics and social change Technological breakthrough Rapid urbanisation Changing economic power For illustrative purposes only. EIIH1219E-1032866-8/52
- 9. Volatility Asset valuations Interest rates Currency values Magnitude Time CYCLICAL THEMES For illustrative purposes only. EIIH1219E-1032866-9/52
- 10. Volatility Asset valuations Interest rates Currency values Magnitude Time For illustrative purposes only. CYCLICAL THEMES EIIH1219E-1032866-10/52
- 11. Longer term in nature Driven by powerful forces Magnitude STRUCTURAL THEMES For illustrative purposes only. Time EIIH1219E-1032866-11/52
- 12. HORSES VS CARS Source: FHWA, IMF, Fisher (1974). For illustrative purposes only. EIIH1219E-1032866-12/52
- 13. 20 YEARS TO 95% Source: FHWA, IMF, Fisher (1974). For illustrative purposes only. EIIH1219E-1032866-13/52
- 14. 0.00% Source: Library of Congress/Grolier Encyclopedia, 2018. For illustrative purposes only. TELEVISIONS IN AMERICAN HOUSEHOLDS 1946 EIIH1219E-1032866-14/52
- 15. 0.00 0.01% Source: Library of Congress/Grolier Encyclopedia, 2018. For illustrative purposes only. TELEVISIONS IN AMERICAN HOUSEHOLDS 1946 EIIH1219E-1032866-15/52
- 16. 0.00 0.01% Source: Library of Congress/Grolier Encyclopedia, 2018. For illustrative purposes only. TELEVISIONS IN AMERICAN HOUSEHOLDS 1960 EIIH1219E-1032866-16/52
- 18. By next year, over 50% of Asia’s citizens are expected to live in urban areas for the first time. RAPID URBANISATION 2019 50% Source: United Nations World Urbanisation Prospects, The 2018 Revision For illustrative purposes only. EIIH1219E-1032866-18/52
- 19. By next year, over 50% of Asia’s citizens are expected to live in urban areas for the first time. RAPID URBANISATION 2019 50% FOR PROFESSIONAL CLIENTS, QUALIFIED CLIENTS AND QUALIFIED INVESTORS ONLY Source: United Nations World Urbanisation Prospects, The 2018 Revision For illustrative purposes only. EIIH1219E-1032866-19/52
- 20. 20 CLIMATE CHANGE Source: BlackRock, PWC, NASA at 31 March 2018. 17 of the 18 hottest years have occurred since 2000 EIIH1219E-1032866-20/52
- 21. The world is changing along with attitudes 21 EIIH1219E-1032866-21/52
- 22. Twitter posts mentioning ESG topics grew 19xover the last five years and are increasingly likely to go viral by the day. 22 Source: BlackRock, 2019. EIIH1219E-1032866-22/52
- 23. 73%of consumers say they would change their consumption habits to reduce their impact on the environment. 23 Source: BlackRock, 2019. EIIH1219E-1032866-23/52
- 25. 5,436sustainable funds launched in Europe over the past 5 years 25 Source: BlackRock, 2019. EIIH1219E-1032866-25/52
- 26. $400BProjected assets in sustainable ETFs in the next 10 years 26 Source: BlackRock, 2019. Note all currencies are stated in USD. There is no guarantee that any forecasts made will come to pass. EIIH1219E-1032866-26/52
- 27. 27 6.4 8.9 16.5 21.7 43.2 2.0 3.1 5.1 7.5 16.5 2015 2016 2017 2018 Sep'19 Global Sustainable ETF AUM iShares Sustainable ETF AUM Source: BlackRock Global Business Intelligence, September 2019. All amounts in $bn USD. The growth in sustainable investing So what are we seeing? EIIH1219E-1032866-27/52
- 28. 28 ESG has beaten or matched the market More data, more choice Sustainable regulations Drivers of change Sources: MSCI ESG Research, December 2016. For illustrative purposes only. EIIH1219E-1032866-28/52
- 29. Sources: MSCI ESG Research, December 2016. For illustrative purposes only. 29 What does sustainable investing encompass? Exclusions ESG Integration Sustainable Themes Sustainable investing Impact EIIH1219E-1032866-29/52
- 30. Clients’ motivations often fall into one or both of these categories: Avoid and Advance SUSTAINABLE INVESTING FRAMEWORK For illustrative purposes only. ESG considerations are evaluated alongside a number of other considerations, and/or would not be the sole consideration when making investment decisions. 30 Avoid is about eliminating exposures to certain sectors or activities Advance is about aligning capital with certain behaviours, activities or outcomes Avoid* Advance Exclusionary Screens ESG Thematic Impact EIIH1219E-1032866-30/52
- 31. An index solution for every type of sustainable investor 31 ESG Screened range ESG Enhanced range SRI range Thematic investing Impact investing Eliminate exposures to companies or sectors that pose certain risks or violate an investor’s values Eliminate certain exposures + Maximise ESG score* to a target tracking error Eliminate certain exposures + Gain exposure to the top ESG performers in each sector Focus on a particular E, S or G trend Seek to generate a measurable sustainable outcome alongside a financial return Avoid* Advance Exclusionary Screens ESG Thematic Impact ESG re-weighting ESG Best-in-Class EIIH1219E-1032866-31/52
- 32. AN INDEX FOR EVERY TYPE OF SUSTAINABLE INVESTOR 32 World EM EuropeUSA Japan EMU Clean Energy I&D Global Green Bond Source: BlackRock, as at 30 September 2019. *Avoid range also includes three Islamic range ETFs that comply with Shariah investment principles. Green denotes equity, pink denotes fixed income ETFs (dark pink–live funds and light pink–strategies with indices already built but do not yet exist as funds) and blue denotes index mutual funds. € Corp World EM IMI EuropeUSA Japan EMU € Corp 0-3 $ EMD $ Corp 0-3 € Corp World EM EuropeUSA Japan Japan EUR $ HY € HY $ Corp ESG Screened range ESG Re-Weighting - Enhanced range ESG Best-in-Class - SRI Equity range ESG F.I. range Thematic investing Impact investing Eliminate exposures to companies or sectors that pose certain risks or violate an investor’s values Maximize ESG score to a target tracking error Gain exposure to the top ESG performers in each sector Focus on a particular E, S or G trend Seek to generate measurable sustainable outcome alongside a financial return Avoid* Advance EIIH1219E-1032866-32/52
- 33. BY INCORPORATING ESG ELEMENTS IN TO YOUR PORTFOLIO, YOU CAN MAKE A SUBSTANTIAL IMPACT ON THE ENVIRONMENT 33 Source: BlackRock, U.S. Environmental Protection Agency (EPA) Equivalencies Calculator as at 28/09/2018. EIIH1219E-1032866-33/52
- 34. WHATS THE IMPACT? 34 Reduction in Portfolio Carbon Intensity1 in SRI Replication vs. Parent Index 34% Equivalent to driving… 274,437 km by an average passenger vehicle Sources: BlackRock Portfolio Analysis and Solutions (BPAS), BlackRock, U.S. Environmental Protection Agency (EPA) Equivalencies Calculator as at 30/09/2019. 1 Carbon Reduction refers to the difference of portfolio carbon intensity between the Parent Index Replication (204 CO2 Metric tonnes/$1M Sales) and SRI Index Replication (134 CO2 Metric tonnes/$1M Sales). This number has been converted into miles driven by an average passenger vehicle using the equivalencies calculator referenced above. EIIH1219E-1032866-34/52
- 35. WHATS THE IMPACT? 35 Reduction in Portfolio Carbon Intensity1 in SRI Replication vs. Parent Index 34% Equivalent to charging… 8,925,862 Smartphones Sources: BlackRock Portfolio Analysis and Solutions (BPAS), BlackRock, U.S. Environmental Protection Agency (EPA) Equivalencies Calculator as at 30/09/2019. 1 Carbon Reduction refers to the difference of portfolio carbon intensity between the Parent Index Replication (204 CO2 Metric tonnes/$1M Sales) and SRI Index Replication (134 CO2 Metric tonnes/$1M Sales). This number has been converted into smartphones charged using the equivalencies calculator referenced above. EIIH1219E-1032866-35/52
- 36. 36 Key messages The time is now Money is moving into sustainable products driven by investor values, risks posed by global challenges and regulatory pressure Achieving investor outcomes iShares product range allows investors to balance their risk, return, cost and ESG objectives Choice and transparency Enhancements in ESG data sets allow construction of targeted exposures 1 2 3 EIIH1219E-1032866-36/52
- 38. THE RIGHT SCREENS CAN MAKE A BIG DIFFERENCE ISHARES ESG SCREENED SOLUTIONS 38 MSCI ESG Screened Index (equity) Market cap weighted MSCI World ESG Screened Index MSCI Emerging Markets ESG Screened Index MSCI Europe ESG Screened Index MSCI EMU ESG Screened Index MSCI USA ESG Screened Index MSCI Japan ESG Screened Index Global equities Regional equities Country specific equities EXPOSURES HOW 38 MSCI index (equity) Screens Controversial weapons Nuclear weapons UN Global Compact (Fail) Thermal coal Civilian firearms Tobacco Oil sands Align with business values Similarity with traditional market capitalization products A sustainable core exposure WHY EIIH1219E-1032866-38/52
- 39. ENHANCED YOUR CORE WITH ESG ISHARES ESG ENHANCED SOLUTIONS 39 39 WHY Increase ESG score with business values and controversies screens Target tracking error and 30% carbon intensity reduction A sustainable core exposure MSCI ESG Enhanced Index (equity) Tilted HOW MSCI index (equity) Screens Severe controversies Controversial weapons Nuclear weapons UN Global Compact (Fail) Thermal coal Civilian firearms Tobacco Oil sands Re-weighting MSCI World ESG Enhanced Focus Index MSCI Emerging Markets ESG Enhanced Focus Index MSCI Europe ESG Enhanced Focus Index MSCI EMU ESG Enhanced Focus Index MSCI USA ESG Enhanced Focus Index MSCI Japan ESG Enhanced Focus Index Global equities Regional equities Country specific equities EXPOSURES EIIH1219E-1032866-39/52
- 40. BUILDING AN ESG BEST-IN-CLASS PORTFOLIO ISHARES SRI SOLUTIONS 40 40 WHY Increase ESG score with business values and controversies screens Incorporate wider set of ESG screens Only select companies with best-in-class ESG characteristics MSCI ESG SRI Market-cap HOW MSCI index (equity) Screens Controversial weapons Controversy score Nuclear weapons Thermal coal Civilian firearms Tobacco Conventional weapons Alcohol Gambling Nuclear power Genetically modified organisms Adult entertainment Selection MSCI World SRI Index MSCI Emerging Markets SRI Index MSCI Europe SRI Index MSCI EMU SRI Index MSCI Japan SRI Index MSCI USA SRI Index Global equities Regional equities Country specific equities EXPOSURES EIIH1219E-1032866-40/52
- 41. CONSTRUCTING AN ESG SCREENED STRATEGY 41 WHY Align with business values Similarity with traditional market capitalization products A sustainable core exposure Screened 0 1 2 3 4 5 6 7 8 9 10 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 ESGScore Tracking Error (%) MSCI World Sustainable Indexes 37% LeaderAverageLaggard The size of the bubble indicates market capitalization coverage Carbon reduction vs MSCI parent Source: MSCI, Blackrock as of 30/09/19 Note: SRI RFF stands for proposed fossil-fuel reduced indices, which will be tracked by the iShares ETF range subject to shareholder approval. EIIH1219E-1032866-41/52
- 42. CONSTRUCTING AN ESG ENHANCED STRATEGY 42 WHY Increase ESG score with business values and controversies screens Target tracking error and 30% carbon intensity reduction A sustainable core exposure Screened Enhanced 0 1 2 3 4 5 6 7 8 9 10 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 ESGScore Tracking Error (%) MSCI World Sustainable Indexes 37% 33% LeaderAverageLaggard The size of the bubble indicates market capitalization coverage Carbon reduction vs MSCI parent Source: MSCI, Blackrock as of 30/09/19 Note: SRI RFF stands for proposed fossil-fuel reduced indices, which will be tracked by the iShares ETF range subject to shareholder approval. EIIH1219E-1032866-42/52
- 43. CONSTRUCTING AN SRI STRATEGY (ESG BEST-IN-CLASS) 43 WHY Increase ESG score with business values and controversies screens Incorporate wider set of ESG screens Only select companies with best-in-class ESG characteristics Screened Enhanced 0 1 2 3 4 5 6 7 8 9 10 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 ESGScore Tracking Error (%) MSCI World Sustainable Indexes 37% 33% 29% LeaderAverageLaggard The size of the bubble indicates market capitalization coverage Carbon reduction vs MSCI parent Source: MSCI, Blackrock as of 30/09/19 Note: SRI RFF stands for proposed fossil-fuel reduced indices, which will be tracked by the iShares ETF range subject to shareholder approval. SRI EIIH1219E-1032866-43/52
- 44. RISKS 44 Risk Warnings Investment in the products mentioned in this document may not be suitable for all investors. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested. The value of investments involving exposure to foreign currencies can be affected by exchange rate movements. We remind you that the levels and bases of, and reliefs from, taxation can change. BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. The data displayed provides summary information. Investment should be made on the basis of the relevant Prospectus which is available from the manager. In respect of the products mentioned this document is intended for information purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buy the securities described within. This document may not be distributed without authorisation from BlackRock. Product Risks iShares $ Corp Bond 0-3yr ESG UCITS ETF EUR Hedged (Acc) Counterparty Risk, Credit Risk, Liquidity Risk iShares $ Corp Bond 0-3yr ESG UCITS ETF USD (Dist) Counterparty Risk, Credit Risk, Liquidity Risk iShares $ Corp Bond ESG UCITS ETF USD (Acc) Counterparty Risk, Credit Risk, Liquidity Risk iShares $ High Yield Corp Bond ESG UCITS ETF USD (Acc) Concentration Risk, Counterparty Risk, Credit Risk, Emerging Markets Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk, Non-Investment Grade Risk, Smaller Companies Risk iShares $ High Yield Corp Bond ESG UCITS ETF USD (Dist) Concentration Risk, Counterparty Risk, Credit Risk, Emerging Markets Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk, Non-Investment Grade Risk, Smaller Companies Risk iShares € Corp Bond 0-3yr ESG UCITS ETF Counterparty Risk, Credit Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk iShares € Corp Bond ESG UCITS ETF EUR (Dist) Counterparty Risk, Credit Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk EIIH1219E-1032866-44/52
- 45. RISKS 45 iShares € High Yield Corp Bond ESG UCITS ETF EUR (Acc) Concentration Risk, Counterparty Risk, Credit Risk, Emerging Markets Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk, Non-Investment Grade Risk, Smaller Companies Risk iShares € High Yield Corp Bond ESG UCITS ETF EUR (Dist) Concentration Risk, Counterparty Risk, Credit Risk, Emerging Markets Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk, Non-Investment Grade Risk, Smaller Companies Risk iShares J.P. Morgan ESG $ EM Bond UCITS ETF EUR Hedged (Acc) Counterparty Risk, Credit Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk, Non-Investment Grade Risk iShares J.P. Morgan ESG $ EM Bond UCITS ETF USD (Acc) Counterparty Risk, Credit Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk, Non-Investment Grade Risk iShares J.P. Morgan ESG $ EM Bond UCITS ETF USD (Dist) Counterparty Risk, Credit Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk, Non-Investment Grade Risk iShares MSCI EM ESG Enhanced UCITS ETF USD (Acc) Concentration Risk, Counterparty Risk, Emerging Markets Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk iShares MSCI EM ESG Enhanced UCITS ETF USD (Dist) Concentration Risk, Counterparty Risk, Emerging Markets Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk iShares MSCI EM IMI ESG Screened UCITS ETF USD (Acc) Concentration Risk, Counterparty Risk, Currency Risk, Emerging Markets Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk iShares MSCI EM IMI ESG Screened UCITS ETF USD (Dist) Concentration Risk, Counterparty Risk, Currency Risk, Emerging Markets Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk iShares MSCI EM SRI UCITS ETF USD (Acc) Counterparty Risk, Currency Risk, Derivatives Risk, Emerging Markets Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk iShares MSCI EM SRI UCITS ETF USD (Dist) Counterparty Risk, Currency Risk, Derivatives Risk, Emerging Markets Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk, Liquidity Risk iShares MSCI EMU ESG Enhanced UCITS ETF EUR (Acc) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk EIIH1219E-1032866-45/52
- 46. RISKS 46 iShares MSCI EMU ESG Enhanced UCITS ETF EUR (Dist) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI EMU ESG Screened UCITS ETF EUR (Acc) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI EMU ESG Screened UCITS ETF EUR (Dist) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI Europe ESG Enhanced UCITS ETF EUR (Acc) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI Europe ESG Enhanced UCITS ETF EUR (Dist) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI Europe ESG Screened UCITS ETF EUR (Acc) Concentration Risk, Counterparty Risk, Credit Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI Europe ESG Screened UCITS ETF EUR (Dist) Concentration Risk, Counterparty Risk, Credit Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI Europe SRI UCITS ETF EUR (Acc) Counterparty Risk, Equity Risk iShares MSCI Europe SRI UCITS ETF EUR (Dist) Counterparty Risk, Equity Risk iShares MSCI Japan ESG Enhanced UCITS ETF USD (Acc) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI Japan ESG Enhanced UCITS ETF USD (Dist) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI Japan ESG Screened UCITS ETF USD (Acc) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI Japan ESG Screened UCITS ETF USD (Dist) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk EIIH1219E-1032866-46/52
- 47. RISKS 47 iShares MSCI Japan SRI EUR Hedged UCITS ETF (Acc) Concentration Risk, Counterparty Risk, Currency Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI Japan SRI UCITS ETF Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI Japan SRI UCITS ETF USD (Dist) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI USA ESG Enhanced UCITS ETF USD (Acc) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI USA ESG Enhanced UCITS ETF USD (Dist) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI USA ESG Screened UCITS ETF USD (Acc) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI USA ESG Screened UCITS ETF USD (Dist) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI USA SRI UCITS ETF EUR Hedged (Dist) Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI USA SRI UCITS ETF USD (Acc) Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI USA SRI UCITS ETF USD (Dist) Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI World ESG Enhanced UCITS ETF USD (Acc) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI World ESG Enhanced UCITS ETF USD (Dist) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI World ESG Screened UCITS ETF USD (Acc) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk EIIH1219E-1032866-47/52
- 48. RISKS 48 iShares MSCI World ESG Screened UCITS ETF USD (Dist) Concentration Risk, Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI World SRI UCITS ETF EUR (Acc) Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk iShares MSCI World SRI UCITS ETF USD (Dist) Counterparty Risk, Equity Risk, Environmental, Social and Governance (ESG) Risk Description of Product Risks Counterparty Risk The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Share Class to financial loss. Credit Risk The issuer of a financial asset held within the Fund may not pay income or repay capital to the Fund when due. If a financial institution is unable to meet its financial obligations, its financial assets may be subject to a write down in value or converted (i.e. “bail-in”) by relevant authorities to rescue the institution. Liquidity Risk Lower liquidity means there are insufficient buyers or sellers to allow the Fund to sell or buy investments readily. Concentration Risk Investment risk is concentrated in specific sectors, countries, currencies or companies. This means the Fund is more sensitive to any localised economic, market, political or regulatory events. Emerging Markets Risk Emerging markets are generally more sensitive to economic and political conditions than developed markets. Other factors include greater 'Liquidity Risk', restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund. Equity Risk The value of equities and equity-related securities can be affected by daily stock market movements. Other influential factors include political, economic news, company earnings and significant corporate events. Environmental, Social and Governance (ESG) Risk The benchmark index only excludes companies engaging in certain activities inconsistent with ESG criteria if such activities exceed the thresholds determined by the index provider. Investors should therefore make a personal ethical assessment of the benchmark index’s ESG screening prior to investing in the Fund. Such ESG screening may adversely affect the value of the Fund’s investments compared to a fund without such screening. EIIH1219E-1032866-48/52
- 49. RISKS 49 Non-Investment Grade Risk Non-investment grade fixed income securities are more sensitive to changes in interest rates and present greater ‘Credit Risk’ than higher rated fixed income securities. Smaller Companies Risk Shares in smaller companies typically trade in less volume and experience greater price variations than larger companies. Currency Risk The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of the investment. Derivatives Risk Derivatives are highly sensitive to changes in the value of the asset on which they are based and can increase the size of losses and gains, resulting in greater fluctuations in the value of the Fund. The impact to the Fund can be greater where derivatives are used in an extensive or complex way. EIIH1219E-1032866-49/52
- 50. IMPORTANT INFORMATION 50 Regulatory Information Issued by BlackRock Advisors (UK) Limited, which is authorised and regulated by the Financial Conduct Authority ('FCA'), having its registered office at 12 Throgmorton Avenue, London, EC2N 2DL, England, Tel +44 (0)20 7743 3000. For your protection, calls are usually recorded. BlackRock is a trading name of BlackRock Advisors (UK) Limited. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock. In the event where the United Kingdom leaves the European Union without entering into an arrangement with the European Union which permits firms in the United Kingdom to offer and provide financial services into the European Union (“No Deal Brexit Event”), the issuer of this material is: -BlackRock Advisors (UK) Limited for all outside of the European Economic Area ; and -BlackRock (Netherlands) B.V. for in the European Economic Area, however, prior to a No Deal Brexit Event and where a No Deal Brexit Event does not occur, BlackRock Advisor (UK) Limited will be the issuer. BlackRock (Netherlands) B.V.: Amstelplein 1, 1096 HA, Amsterdam, Tel: +31 020 549 – 5200, Trade Register No. 17068311. For more information, please see the website: www.blackrock.com. For your protection, telephone calls are usually recorded. BlackRock is a trading name of BlackRock (Netherlands) B.V.. EIIH1219E-1032866-50/52
- 51. 51 iShares plc, iShares II plc, iShares III plc, iShares IV plc, iShares V plc, iShares VI plc and iShares VII plc (together 'the Companies') are open-ended investment companies with variable capital having segregated liability between their funds organised under the laws of Ireland and authorised by the Central Bank of Ireland. Further information about the Fund and the Share Class, such as details of the key underlying investments of the Share Class and share prices, is available on the iShares website at www.ishares.com or by calling +44 (0)845 357 7000 or from your broker or financial adviser. The indicative intra-day net asset value of the Share Class is available at http://deutsche- boerse.com and/or http://www.reuters.com. A UCITS ETF’s units / shares that have been acquired on the secondary market cannot usually be sold directly back to the UCITS ETF itself. Investors who are not Authorised Participants must buy and sell shares on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees and additional taxes in doing so. In addition, as the market price at which the Shares are traded on the secondary market may differ from the Net Asset Value per Share, investors may pay more than the then current Net Asset Value per Share when buying shares and may receive less than the current Net Asset Value per Share when selling them. For investors in Finland The funds mentioned are registered for public distribution in Finland and are authorised by the Finanssivalvonta (Fiva), the Financial Supervisory Authority (FIN-FSA), in Finland. Any decision to invest must be based solely on the information contained in the Company’s Prospectus, Key Investor Information Document and the latest half-yearly report and unaudited accounts and/or annual report and audited accounts. Investors should read the fund specific risks in the Key Investor Information Document and the Company’s Prospectus. This document is strictly confidential and may not be distributed without authorisation from BlackRock. Restricted Investors This document is not, and under no circumstances is to be construed as an advertisement or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof, where the companies/securities are not authorised or registered for distribution and where no prospectus has been filed with any securities commission or regulatory authority. The companies/securities may not be acquired or owned by, or acquired with the assets of, an ERISA Plan. EIIH1219E-1032866-51/52
- 52. IMPORTANT INFORMATION 52 Index Disclaimers The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI ESG Research, Bloomberg, or Barclays, and MSCI ESG Research, Bloomberg and Barclays bear no liability with respect to any such funds or securities or any index on which such funds or securities are based. The Prospectus contains a more detailed description of the limited relationship MSCI ESG Research, Bloomberg, and Barclays have with BlackRock and any related funds. "J.P. Morgan" and "J.P. Morgan EMBISM Global Core Index" are trademarks of JPMorgan Chase & Co. licensed for use for certain purposes by BlackRock Institutional Trust Company, N.A. ("BTC"). iShares® is a registered trademark of BTC.J.P. Morgan is the Index Provider for the Underlying Index. J.P. Morgan is not affiliated with the Fund, BFA, State Street, the Distributor or any of their respective affiliates. J.P. Morgan provides financial, economic and investment information to the financial community. J.P. Morgan calculates and maintains the J.P. Morgan EMBISM Global Core Index, J.P. Morgan Emerging Markets Bond Index Plus, J.P. Morgan Emerging Markets Bond Index Global and Emerging Markets Bond Index Global Diversified. Security additions and deletions into the emerging markets bond indexes do not in any way reflect an opinion in the investment merits of the security. iShares funds are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or any index on which such funds are based. The Prospectus contains a more detailed description of the limited relationship that MSCI has with BlackRock and any related funds. © 2019 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, iSHARES, BUILD ON BLACKROCK and SO WHAT DO I DO WITH MY MONEY are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. EIIH1219E-1032866-52/52
Editor's Notes
- ISALL
- This leads us to how we think about themes – we have cyclical and structural themes. The various economic and monetary cycles, which have a clear influence on asset prices over the short to medium term
- Structural themes are longer term in nature and have irreversible consequences for the world– such as demographics and technological change. We call these drivers megatrends. As an example I want you to think about the megatrend around technology. I want you to think about how your life has changed over the last 10 years in terms of mobile usage and how it can change over the next 10 years.
- Consider the implications technology has had on urbanization through improving methods of transport. 150 years ago, horses were the main method of personal transport. Then came the invention of the combustion engine, leading to the motorcar. Transformative themes are by nature under-appreciated. Henry Ford actually did a survey in 1907of potential users on how to improve their transportation, and the answer was “we need a faster horse”.
- Yet, after thousands of years of human riding horses, it only took 20 years to make animals obsolete as a mode of transport. This is an example of unprecedented exponential growth. Fast forward 100 years and if we think about the 2 megatrends: Climate Change and Technology. The questions we should ask are? Will our children own their own car? Will this car have a combustion engine? Will they even drive at all? And most importantly, how are we investing today to capture this major investment theme? Here again, buying Tesla would not be an optimal solution.
- So why is this relevant today? The main reason is because the megatrends are accelerating as we speak. Some transformative themes are playing out right now.
- Broader than Asia, the United Nations estimate that by 2030 2/3s of the Global population will live in cities This leads to massive construction and infrastructure opportunities. And these buildings and cities answer to a new set of rules, from energy efficiency, waste management, green infrastructure or connectivity. The companies positioned to lead in these new sectors, some of which did not exist 5 years ago, are very likely to do well in the next 10 to 20 years.
- Broader than Asia, the United Nations estimate that by 2030 2/3s of the Global population will live in cities This leads to massive construction and infrastructure opportunities. And these buildings and cities answer to a new set of rules, from energy efficiency, waste management, green infrastructure or connectivity. The companies positioned to lead in these new sectors, some of which did not exist 5 years ago, are very likely to do well in the next 10 to 20 years.
- Let us set the topic in perspective: sustainability is seemingly everywhere. We are witnessing an almost daily news stream that ranges from climate change through to modern slavery. Highlight Extinction Rebellion and its effects: In May the UK Parliament declared a national climate emergency and shortly thereafter the UK announced a commitment to net zero CO2 emissions by 2050 – the first of the G7 nations to do so. (use different examples depending on which client/region presenting to). Societies are changing, our environment is front of mind, regulation is emerging – the way you/our clients think about sustainable investing is also in flux. Sustainable Investing has the potential to transform our industry and make it better able to reflect what is already shaping our consumer choices and economies.
- • Also beyond consumer choices: sustainability related risks are high on the agenda of the global business community: the World Economic Forum’s 2019 Global Risks Report identified that over a ten-year horizon, extreme weather and climate-change policy failures are seen by the global business community as the gravest threats. (the GRR presents the results of the Global Risks Perception Survey, in which nearly 1,000 decision-makers from the public sector, private sector, academia and civil society assess the risks facing the world.)
- With so much interest in ESG as a “hot” topic the mushrooming of funds in the market is making some investors disoriented, an informed choice seems more difficult.
- We believe this is just the beginning, and expect Sustainable ETFs assets under management to rise in the next decade to more than $400 billion by 2028, with Europe representing more than 60% of that (i.e. 280bn).
- Assets in dedicated sustainable investing strategies around the world have grown rapidly over the last few years. We are seeing a surge in clients’ interest in incorporating sustainability-related insights into their investments. This demand looks poised to accelerate — for all the reasons highlighted so far, driven by societal changes, increased regulation and investor focus, as well as greater investment conviction. 2019 has been a pivotal year for Sustainable ETFs, with this category gaining centre stage in our client conversation and flows. Over the last five years the Sustainable ETF industry globally has grown almost eight-fold, going from $5.7bn at the end of 2014 to $46.7bn at the end of October this year. Europe has been leading the charge on this trend with $26.1bn in ETF assets, attracting $12bn year to date only, meaning 1 in every 7$ going into UCITS ETFs have been in Sustainable ones. Flows are one side of the story of Sustainable ETFs going mainstream - the breadth of client adoption is the other one. What used to be an institutional trend across northern Europe is spreading to a much broader investor base geographically as well as by client type. While the bulk of the assets remain driven by asset owners transitioning from traditional benchmarks to ESG integrated ones, we see wealth distributors using sustainable building blocks to create standalone sustainable portfolios to meet increasing end-investor demand. There are countries, such as the Benelux region where this integration is happening across traditional portfolios as well, on the back of regulatory pressure relating to a rising number of Sustainable product labels and enhanced reporting requirements around investor preference with regard to sustainability (e.g. EU draft rules on how investment firms and insurance distributors should take sustainability issues into account when providing advice to their clients under MiFID II)
- A greater focus on value for money and the use of better technology is empowering people to question how effective their portfolios are in achieving their intended outcomes, also with regard to sustainability. Against this backdrop, sustainable investing should be as easy as ‘traditional’ investing, and more and more investors are discovering that ETFs can deliver beyond broad market exposures. Furthermore, ESG data metrics underpinning sustainable fund methodologies are expanding in scope and quality. We believe that ESG integration will become the norm for many investors, and that ETF that account for this will play a key role in bringing sustainable investing to the heart of portfolios.
- Sustainable investing is the combination of traditional investment approaches with environmental, social and governance (ESG) insights. Sustainable investing is used as an umbrella term for screened, ESG, thematic, and impact investing. BlackRock defines ESG investing as the practice of explicitly incorporating environmental, social, and governance information into investment decisions to enhance risk-adjusted returns. ESG information relates to an environmental, social or governance issue (e.g. climate risk, human rights or labour standards), and gives an indication of the preparedness, disclosure, or performance of a company on that ESG issue. ESG information can impact the long-term risk and return profile of investment portfolios and is meant to help investors understand ESG risks and opportunities that are not captured in traditional financial analysis. A risk is deemed material to an industry when it is likely that companies involved will incur substantial costs in connection with it (for example: regulatory ban on a key chemical input requiring reformulation). An opportunity is material to an industry when it is likely that companies could capitalize on it for profit (for example: opportunities in clean technology for the LED lighting industry).
- Sustainable investing is not just about avoiding certain exposures (e.g. screening out controversial weapons or tobacco investments) but increasingly also about advancing ESG objectives through ESG integration and a focus on financial materiality. Incorporating relevant sustainability insights can provide a more holistic view of the risks and opportunities associated with a given investment. In addition to consideration of ESG in the investment approach, we place emphasis on stewardship activities. Across all index strategies, where BlackRock portfolios aim to track the benchmark index, our stewardship efforts and engagement with portfolio companies are the mechanisms by which we can integrate sustainability insights consistent with our fiduciary role as a long-term investor. At BlackRock investment stewardship refers to engagement with public companies to promote corporate governance practices that are consistent with encouraging long-term value creation for shareholders in the company. Engagement and voting are important components of BlackRock’s stewardship activities. Stewardship is undertaken across all investment strategies, conventional and sustainability or impact, to promote sound business practices in relation to the material environmental and social factors in the operations that are likely to impact operational excellence and long-term financial performance. For clients invested in index strategies, engagement and voting is the only way we can signal support or concern to the management and boards of companies that we invest in on our clients’ behalf.
- ESG index investing provides transparent, rules-based, and cost-efficient exposure to companies with particular ESG characteristics. The objective of the index may be to avoid certain kinds of companies (“Avoid”). Alternatively, it may be to gain exposure to issuers with better ESG ratings, an ESG theme, or to generate positive environmental or social impact (“Advance”). ESG indexes can combine elements of Avoid and Advance approaches. From light green to dark green – from business screens to impact solutions: we have developed a consistent yet flexible framework to offer sustainable investment choices to our clients. The framework allows for a diversity of approaches across different investment styles and delivers on sustainable investment objectives for our clients – there is no one-size-fits all approach. This is the reason why we have 3 distinct sustainable solutions across market-cap based indices: Screened – an alternative to standard benchmarks – 7 screens Enhanced – allows clients to improve ESG credentials without straying too far from the standard benchmark SRI – ‘full ESG’, multiple exclusions, highest ESG scores, for those that believe fully in benefits of ESG and not constrained by higher tracking error
- There is an index out there for every sustainable investor, across both equities and fixed income, through to thematic impact investing - enabling clients to make an informed choice from a clear palette of products and create portfolios out of iShares sustainable building blocks!
- Smart Beta –
- The MSCI ESG Screened Indexes aim to represent the performance of a free float adjusted market capitalization weighted investment strategy that excludes companies: • that are associated with controversial, civilian and nuclear weapons and tobacco; • that derive revenues from thermal coal and oil sands extraction; or • that are not in compliance with the United Nations Global Compact Principles. [important to note: e.g. not all thermal coal exposure is removed – the revenue threshold is 5%]
- The MSCI ESG Enhanced Focus Indexes also include the 7 business screens (plus a controversy screen too) and are designed to maximize exposure to positive environmental, social and governance (ESG) factors while reducing the carbon equivalent exposure to carbon dioxide (CO2) and other greenhouse gases (GHG) as well as their exposure to potential emissions risk of fossil fuel reserves by (30%). These indexes also aims to maintain risk and return characteristics similar to those of their parent indexes.
- The MSCI SRI Indexes are free float-adjusted market capitalization weighted indexes that exclude companies that are inconsistent with specific values-based criteria focused on products with high negative social or environmental impact (the exclusion list is more exhaustive than for ESG Screened and ESG Enhanced). Additionally, these indexes are designed to represent the performance of companies that have high ESG ratings relative to their sector peers, to ensure the inclusion of the best-in-class companies from an ESG perspective. Further, these indexes aim to target sector weights that reflect the relative sector weights of the underlying MSCI Global Investable Market Indexes to limit the systematic risk introduced by the ESG selection process. Overall the MSCI SRI Indexes target coverage of 25% of the underlying MSCI parent index (“Parent Index”). The best-in-class approach is here taken to a new level.
- Client priorities can be balanced: Aligning screens Staying close to a benchmark And having an ESG exposure that also results in a carbon intensity reduction
- Improve ESG score vs parent benchmark Target a tracking error and a 30% carbon intensity reduction Including a product in the portfolio which includes but also goes beyond exclusions and embraces full ESG integration.
- Increase ESG score while increasing the number of business and controversy screens Select only those companies for inclusion in the fund which exhibit best-in-class ESG charactreristics. Reduce the carbon footprint vs the parent benchmark.