BlackRock has launched a fixed income strategy that incorporates environmental, social and governance (ESG) factors into its stock selection process, screening out instruments that do not meet relative criteria.
The BlackRock Strategic Fund (BSF) Sustainable Euro Bond fund will use MSCI’s ESG ratings to screen corporate, sovereign and government bond issuers and rate how the issuers manage ESG risks relative to its industry or peer group.
The fund will be managed by BlackRock’s head of the fundamental pan European fixed income team Michael Krautzberger and Ronald van Loon. The pair currently manage the €5.3bn (£4.5bn) BlackRock Global Fund (BGF) Euro Bond strategy.
They will continue to invest across a range factors including currencies, countries, sectors, securities, duration and yield curve positions – but with new ESG considerations.
Mr Krautzberger said companies with high ESG scores, especially on governance, tend to be less prone to negative surprises. He believed this was an important consideration given the asymmetric impact of unexpected news on bond prices.
He added: “Sustainable investing is becoming more mainstream as investors globally are placing greater emphasis on transparency while seeking an ESG approach to their investments.
“We also expect to hold a higher proportion of green bonds in this fund than we do in non-ESG strategies.”
