What are the best BlackRock socially responsible investing funds? If you wish to invest in BlackRock sustainable funds, here is everything you need to know.
Undoubtedly, socially responsible investing has become the goal of many investors. This is in light of the devastating impacts of global warming and environmental degradation on our planet.
Now, every small act to reverse this trend is paramount, and investors are no longer just looking for profits but also environmental upgrades. They want to invest in companies that promise a good return on investment and employ strategies that protect the environment.
BlackRock is a company that helps investors achieve such goals. With BlackRock’s socially responsible investing funds, investors can invest in companies that appeal to their environmental motivations.
Today, we explore some of the best BlackRock socially responsible investing funds to help you reach your sustainable investing goals.
Top BlackRock Socially Responsible Investing Funds
BlackRock’s socially responsible investing is all about inventing new and better business methods. The company offers numerous socially responsible investment options, allowing investors to choose what best suits their motivation.
Recently, BlackRock has been working hard to fulfill Larry Fink’s promise to focus more on climate change investments. This is achieved through a slate of iShares socially responsible funds, which consider social and environmental aspects when choosing companies to invest in.
The recently launched set of BlackRock ESG funds include:
1. The iShares ESG Aware Conservative Allocation ETF (EAOK)
This iShares ESG fund tracks investment outcomes of an index made of an assets portfolio from companies that show positive ESG characteristics, as per the identified index provider.
As part of the fund’s investment strategy, it offers investors access to a portfolio of primary funds considering the primary ESG issues. Each primary ESG fund in the portfolio seeks to track indexes that apply business involvement screens, including controversial weapons, thermal coal, tobacco, and oil sands.
These screens are centered on specific thresholds, including revenue and percentage of revenue, to determine which companies can be included in the funds.
If you want a diversified, sustainable investment portfolio, this is one of those BlackRock socially responsible investing funds to consider. It gives you a wide blend of stocks and bonds from sustainable global companies. And, with the help of BlackRock fund advisors, you can invest in a balanced, sustainable portfolio with assets from socially responsible companies.
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2. iShares ESG Aware Moderate Allocation ETF (EAOM)
This is an open-end iShares sustainable ETF fund that goes beyond the traditional assets, either leveraged or short-term strategies. The fund is designed to track a specific index comprising an assets portfolio representing positive ESG characteristics.
Over 80% of this fund’s portfolio assets comprise securities that encompass the index. It offers investors a chance to invest in various securities from companies considering ESG issues in their strategies. If you are looking for reliable passive income streams, this fund offers you one through dividends.
By investing in this fund, you are actually investing in all six underlying holdings. The net expense ratio is 1.8%. The fund has an A in MSCI ESG Fund Rating and avoids assets deemed to have interests in tobacco, weaponry, thermal coal, oil sand, etc.
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3. The iShares ESG Aware Growth Allocation ETF (EAOR)
This is also one of the best BlackRock socially responsible investing funds that allow you to invest your money in a way that benefits the environment. The BlackRock ESG fund comprises a portfolio of assets incorporating environmental, social, and governance traits.
Investing in this fund will diversify your money among the top six holdings, including EAGG, ESGU, ESGE, ESGD, ESML, and XTSLA. Its expense ratio is 0.32%, while its net expense ratio is 0.18%.
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4. The iShares ESG Aware Aggressive Allocation ETF (EAOA)
Like the other iShares sustainability funds, the EAOA fund creates investment portfolios from companies that show positive social, environmental, and governance aspects. This fund also avoids assets from companies interested in civilian firearms, tobacco, thermal coal, and sand oils. It, however, allows for some assets in companies with a maximum 0.11% interest in nuclear weapons.
As of July 2021, the fund managed assets worth $19.725 million, with a YTD NAV total return ratio of 9.97%. As mentioned above, investing in this fund will give you access to five of the top six holdings.
The fund’s portfolio comprises 79.66% equity, 19.58% fixed income, and 0.75% cash. It’s among the best BlackRock socially responsible investing funds to help you achieve your sustainability goals.
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5. BlackRock ESG Bond Fund
This fund offers socially responsible investors a blend of capital and income growth. It exposes them to a portfolio comprising debt securities across various fixed-income instruments and sectors. The fund creates its portfolio using security selection and asset allocation models.
This fund selects corporate bonds from companies with positive aggregate societal results, based on BlackRock’s requirements, compared to the Bloomberg Barclays US Aggregate Bond Index.
With a 4-star overall Morningstar rating, the fund offers just what the investors want. Therefore, if you haven’t still decided which of the BlackRock socially responsible investing funds to try, you can give this one a shot.
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Popular BlackRock Investment Funds
1. BlackRock Equity Index Fund
This is one of the major BlackRock index funds, comprising more than 4 billion dollars in managed assets. Consistency in positive annual turnover and ethical corporate governance are some of the fund’s key aspects that make it popular with socially responsible investors.
The fund is almost exclusively US-based, meaning its investment portfolios are US-based. Recent data shows that approximately 98.5% of the fund’s total portfolio value comprises US stocks. On the other hand, only around 0.9% of the entire fund’s value includes non-US stocks.
However, while stocks dominate this fund’s portfolio, it also invests in other assets like bonds, cash, etc. But, they account for just a minor percentage of its value.
One unique thing about the Blackrock Equity Index Fund is its focus on technology. For instance, out of the fund’s top 10 holdings, 6 are tech companies, including technology giants like Apple, Amazon, Microsoft, and Alphabet.
As for the non-tech holdings, the fund is interested in companies like Johnson and Johnson, Berkshire Hathaway, JP Morgan Chase, and Exxon Mobil.
This Equity Index Fund manages more than $4 billion in assets, with a consistent average annual turnover of 5.49%. At the same time, its annual operating expenses amount to 0.02% of the fund’s total assets value under management.
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2. BlackRock US Debt Index Fund
This is an open-end, US-based fund. It’s one of the most common BlackRock socially responsible funds that target to generate long-term returns, just like an investment-grade bond ETF (exchange-traded fund).
The BlackRock US Debt Index Fund holds assets that track investment-grade bond ETFs. It invests in indexed mutual funds, ETFs, cash, collective funds, and other similar investments.
If you want access to some top-quality debt securities, BlackRock US Debt Index Fund offers an incredible option. The fund aims to attain investment results that are the same as the price and yield performance of the underlying index (as per Bloomberg Barclays US) before all fees and expenses.
As for the investment strategy, BlackRock manages the fund through representative sampling indexing. It contains zero US-based and non-US-based stocks. The fund is typically invested and reinvested mainly in a debt securities portfolio. The fund manages over $699.42 million in assets, with an annual turnover ratio of 18.12%.
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3. BlackRock Technology Fund
The BlackRock Technology Fund is designed to maximize total returns. Unlike the previous two funds, which are US-based, this one is global. It invests around 70% of its portfolio assets in equity securities of the world’s major tech companies. Most of its holdings are in companies whose main business is technology.
One crucial thing to note about this fund is that all its currency-hedged share classes use derivatives to prevent losses due to currency fluctuations. However, using derivatives for a hedged share class will pose the risk of spillover (contagion). However, the fund’s management ensures that appropriate procedures are implemented to mitigate the spill-over risk to the other share classes.
This fund enjoys an A in the MSCI ESG Fund Rating regarding sustainability. Therefore, if you are looking for the best BlackRock socially responsible investing options, this is one of them. Its strategies avoid investing in companies that engage in weapons, tobacco, thermal coal, or oil sands.
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5. BlackRock Money Market Fund
BlackRock was established to help people manage and grow their money. They do so by aligning their investments and values with funds that support sustainability and positive social impact.
The US money market funds include four main options:
- Institutional prime funds
- Institutional municipal funds
- Government and Treasury funds
- Retail prime funds
Each of these categories comprises several smaller funds that one can invest in. For more details on each, contact BlackRock fund advisors.
This fund’s primary investment objective is to achieve the highest current income level consistent with principal and liquidity maintenance stability.
To help achieve this objective, the fund invests in a wide spectrum of short-term but high-quality US-based money market instruments, including US and foreign banks and government and commercial obligations. This fund also seeks to maintain a net asset value of $1.00 per share.
The securities the fund acquires are subject to various key requirements, including quality, diversification, etc., per Rule 2a-7 of the 1940 Investment Company Act and other ‘SEC’ rules (Securities and Exchange Commission).
The minimum initial investment for Investor A in this fund is $1,000 for an account, except for the following:
- $250 for specific fee-based programs
- $100 for specific employer-funded retirement plans
- $50 for investors seeking automatic investment plans
The minimum initial investment for institutional shares is $2 million for individuals and institutions. Institutional shares are available only for clients of listed investment advisors who have invested at least $250,000 in the Fund.
You should note that dividends and incomes from BlackRock’s Money Market Portfolio might be subjected to federal income taxes. They might get taxed as capital gains or ordinary income unless you enjoy tax exemption as an investor.
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BlackRock Overview
Established in 1988, BlackRock is a multinational investment management firm with headquarters in New York. Initially, Laurence Douglas Fink and his partners established the company for two reasons;
- Risk management
- Fixed income asset management
This American conglomerate is undoubtedly one of the largest global asset managers. The company has a presence in 30 countries, serves clients in around 100 countries, and manages over $9 trillion in assets. If you are looking for an asset management firm, BlackRock offers an excellent option.
The company has over 7,500 employees in the US only and offers its clients over 35 million retirement plans in the country. As for credibility and acceptance, over 100,000 financial advisors chose the company to assist them in creating their clients’ portfolios.
Also, regarding socially responsible investing, BlackRock is never left behind. In his 2020 annual open letter, the company’s CEO made environmental sustainability the core goal for its future investment decisions. The company even declared that it would sell its $500 million worth of coal investments.
In the speech, Larry promised to double the company’s sustainable ETF offerings, eliminate thermal coal investments, and encourage key providers to emphasize ESG benchmarks.
As one of the biggest global asset managers, BlackRock’s investment climate change funds will have substantial effects on ESG issues. Both companies and individual investors will have a chance to make a difference.
Undoubtedly, the 2020 pandemic has raised public, corporate, and government awareness of the need for environmental protection. Sustainable and value-based investing have steeply surged amid the COVID-19 pandemic and the anti-racism protests.
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What Is Socially Responsible Investing?
The fact is, when the term sustainable investing comes up, different interpretations also emerge. But whatever sustainable goal motivates an investor, BlackRock has a solution.
Socially responsible investing, also known as green investing or ethical investing, includes all investment strategies that try to balance financial return on investment with environmental/social good.
This means that while the financial return is desired, the investment should also affect social change, which the investors regard as positive.
The main drawback is that this kind of investment only constitutes a minor percentage of a corporation’s total funds. Also, they are faced with numerous obstacles.
Generally, investors here look for corporations that promote consumer protection, environmental stewardship, human rights, racial equality, gender diversity, etc. Sometimes, SRI strategies avoid investments deemed to have negative environmental/social effects. They avoid businesses that promote alcohol, gambling, tobacco, weapons, fast foods, fossil fuels, etc.
Most of the best BlackRock socially responsible investing tends to consider issues under the ESG umbrella – environmental, social justice, and corporate governance.
By integrating traditional investment insights and strategies with ESG ones, individual investors and companies can sustainably pursue their investment goals.
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Pros and Cons of BlackRock Socially Responsible Investing
Like many other forms of investments, BlackRock’s socially responsible investing funds also have a good and a bad side. However, the good, in this case, surpasses the bad. Here are the major pros and cons of these investment funds.
Pros
- Gives the investor a sense of fulfillment, knowing that their money is supporting their beliefs and values. Generally, it’s making a positive impact besides generating more money.
- The funds encourage both individuals and companies to take action to protect the environment. This means we can slowly revert the devastating effects of pollution and global warming.
- It allows investors to avoid socially irresponsible companies and make money through other investments.
- BlackRock’s Socially Responsible Investing encourages a culture of investing in things that matter. Not only to the individual investor but to the planet as a whole!
Cons
- Sometimes, choosing between profits and values is hard, especially when other non-socially responsible funds offer more lucrative deals.
- Significant research is required before identifying the best sustainable investments that fit your motivation and values.
- Not all investments that claim to be socially responsible are indeed that. Some are just Greenwashing.
While BlackRock funds for sustainability are a major step towards responsible investing, much more must be done. Laws and regulations must be passed to support the initiatives and raise awareness. This way, we can create a culture of thinking about how our actions affect the rest of the planet.
