Blackrock ‘low carbon’ ETF raises record $1.25bn

BlackRockA new ‘low-carbon’ ETF set up by Blackrock last week became the biggest launch in the Exchange Traded Fund industry’s 30-year-old history when it raised approximately $1.25bn in its first day of trading. Set up to invest in companies that the world’s largest asset management corporation considers most likely to prosper in a low-carbon world, the BlackRock US Carbon Transition Readiness ETF (LCTU) will focus on investments in shares of Russell 1000 companies that are deemed to be best positioned for the energy transition. The fund’s remit ranges from ‘clean’ technology to waste and water management.

The Blackrock ETF’s barnstorming launch is the latest indication of the boom being enjoyed by other thematic funds focused on investments that meet environmental, social and governance standards. Last year, these attracted a record $31 billion, almost 400% up on the prior year. Investors poured a further near-record $6.3bn into them this January, as they predicted that the Democrats’ clean sweep of the US government would usher in a raft of green policies.

Following last month’s unveiling of President Biden’s $2.3 trillion infrastructure plan, that appears to have been a very good call. Having emphatically denied that he supported the idea of a Green New Deal in the run-up to last year’s presidential elections, more than half of his latest plan is dedicated to reducing CO2, with a goal of eliminating fossil fuels through a combination of federal spending, subsidies and regulation. On Monday this week, Biden met with a bipartisan group of lawmakers to discuss how to pay for the new plan.

Paris AgreementIts commitment to environmental protection could prove a defining issue for the Biden administration and its attitude toward the US’s global responsibilities. It doesn’t take a degree in economics or environmental science to recognise that, regardless of their sphere of operation, both public- and private-sector companies will have to be persuaded or coerced into lowering their carbon footprint if the world is to have any chance of limiting global warming to below 2º Celsius as set out in the UN’s Paris Agreement.

This January, Blackrock said it was managing $50 billion ‘in solutions that support the transition to a low-carbon economy’, including green bonds and a renewable power infrastructure business that invests in the wind and solar power markets. It also pledged to expand dedicated low-carbon, transition-readiness strategies to offer investors exposure to companies that are most effectively adapting to transition risks. The launch LCTU show it is willing to put at least some of its investors’ money where its mouth is.