Issuers of exchange-traded funds (ETFs) are not shy about cutting fees on their products in an effort to attract more assets from investors. No corner of the ETF universe is off limits when it comes to sponsors trimming fees, and that sentiment is being confirmed once again as BlackRock, Inc.'s (BLK) iShares unit announced expense ratio reductions on several of its ETFs aimed at environmental, social and governance (ESG) investing principles.
BlackRock's iShares unit, the world's largest ETF sponsor, has eight ETFs aimed at sustainable investing themes, several of which are dedicated ESG funds. The issuer launched four ESG ETFs last year. "The company lowered fees by as much as 20 basis points at the offerings, which total about $204 million in assets, according to a Securities and Exchange Commission filing. It also made reductions of about 2 basis points on eight bond ETFs. The 11 funds have total assets under management of about $4 billion," reports Bloomberg. (See also: 3 Trends to Watch in ESG Investing.)
The iShares MSCI EAFE ESG Optimized ETF (ESGD) now has an annual fee of 0.2%, or $20 on a $10,000 stake, down from 0.4%. ESGD tracks the MSCI EAFE ESG Focus Index and is almost 14 months old. The ETF is off to a solid start, with $123.1 million in assets under management. The iShares MSCI EM ESG Optimized ETF (ESGE) is now charging 0.25% after debuting with an expense ratio of 0.45% per year. Like ESGD, ESGE debuted in June 2016. The emerging markets ESG ETF, which tracks the MSCI Emerging Markets ESG Focus Index, has $75.1 million in assets under management.
Some data points and academic research suggest that ESG investing principles can be potent when combined with international equities. ESGE is up about 26.4% year to date, which slightly trails the standard MSCI Emerging Markets Index. ESGD, the EAFE ESG fund, is up about 18.2% this year, putting it in line with the MSCI EAFE Index. (See also: A Responsible Way to Solid EM Returns.)
"Socially responsible ETFs hold the least amount of assets of any smart beta category at $1.8 billion," according to Bloomberg. The iShares MSCI USA ESG Select ETF (ESGU), which debuted in December, also saw its expense ratio reduced to 0.15% per year from 0.28%. That ETF, which tracks the MSCI USA ESG Focus Index and concentrates on U.S. stocks, is up more than 12% year to date. ESGU has just $5.4 million in assets.
iShares, which is the largest issuer of fixed income ETFs, also said that it is lowering fees on eight of its bond ETFs. That is nearly 10% of the issuer's total bond ETF roster. (See also: Guide to ETF Providers: iShares.)