BlackRock has introduced a new exchange-traded fund (ETF) designed to provide investors with sustainable exposure to global utility companies. The iShares MSCI World Utilities Sector Advanced UCITS ETF (WUTS) began trading on Euronext Amsterdam and is now available across 14 European markets, including the UK, France, Germany, Italy, and Switzerland.

The fund targets a 30% reduction in carbon emissions and fossil fuel reserve exposure compared to its parent index. It also intends to enhance exposure to environmental, social, and governance (ESG) factors by 20%, offering a more climate-conscious alternative for medium- to long-term investors.

WUTS tracks the MSCI World Utilities Advanced Select 20 35 Capped Index, which includes 51 utility sector stocks from 23 developed markets. To maintain diversification and avoid overconcentration, the index caps the largest holding at 35% and limits others to 20%, with a 10% buffer reviewed quarterly.

Read More: Top 8 ESG Mutual Funds for Responsible Investors in 2023

BlackRock describes the strategy as a “binding and significant ESG optimization approach,” seeking to improve ESG scores relative to the broader utilities index while keeping broad market exposure. The fund carries a total expense ratio (TER) of 0.18%, making it a competitively priced option in the ESG ETF space.

However, the ETF’s long-term performance has been mixed. In 2023, it returned +3.6%, outperforming the parent index’s 0.3% gain. But in 2022, it fell 13.1%, deeper than the parent index’s 4.7% drop. Over the past decade, it has underperformed the broader MSCI World Utilities Index by 1.5% annually, reflecting some of the trade-offs of ESG screening.

BlackRock cautions that the fund’s ESG criteria could limit its investment universe, potentially affecting returns compared to non-ESG funds. It also notes that WUTS is more sensitive to localized economic, political, or regulatory events due to its sector-specific and regional exposure.

The launch aligns with BlackRock’s broader strategy to offer innovative sustainable products. Earlier this year, the firm introduced an S&P 500 ETF capped at 3% per constituent to improve diversification.

Also Read: ESG and Stock Price: What is the Effect of ESG Rating Changes on Returns?

With over $3 trillion in assets under management across 468 ETFs, BlackRock continues to lead the global ETF market and reinforce its commitment to sustainable investing and ESG integration.

For more relevant news, follow our Investors News.