Fixed Income

BGF Global Government Bond Fund

Overview

Important Information: Capital at Risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Changes to interest rates, credit risk and/or issuer defaults will have a significant impact on the performance of fixed income securities. Noninvestment grade fixed income securities can be more sensitive to changes in these risks than higher rated fixed income securities. Potential or actual credit rating downgrades may increase the level of risk. Derivatives may be highly sensitive to changes in the value of the asset on which they are based and can increase the size of losses and gains, resulting in greater fluctuations in the value of the Fund. The impact to the Fund can be greater where derivatives are used in an extensive or complex way. The Fund may seek to exclude Funds which are not subject to ESG-related requirements. Investors should therefore make a personal ethical assessment of the Fund’s ESG screening prior to investing in the Fund. Such ESG screening may adversely affect the value of the Fund’s investments compared to a fund without such screening.

All currency hedged share classes of this fund use derivatives to hedge currency risk. The use of derivatives for a share class could pose a potential risk of contagion (also known as spill-over) to other share classes in the fund. The fund’s management company will ensure appropriate procedures are in place to minimise contagion risk to other share class. Using the drop down box directly below the name of the fund, you can view a list of all share classes in the fund – currency hedged share classes are indicated by the word “Hedged” in the name of the share class. In addition, a full list of all currency hedged share classes is available on request from the fund’s management company

To the extent the Fund undertakes securities lending to reduce costs, the Fund will receive 62.5% of the associated revenue generated and the remaining 37.5% will be received by BlackRock as the securities lending agent. As securities lending revenue sharing does not increase the costs of running the Fund, this has been excluded from the ongoing charges.

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Performance

Performance

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Distributions

Ex-Date Total Distribution
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This chart shows the fund's performance as the percentage loss or gain per year over the last 10 years.

  2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Total Return (%) 7.8 0.1 2.8 2.3 0.5 7.4 7.1 -3.0 -14.1 5.8
Constraint Benchmark 1 (%) 8.4 1.3 3.8 2.1 2.6 7.6 6.1 -2.3 -12.9 6.4

Performance is shown after deduction of ongoing charges. Any entry and exit charges are excluded from the calculation.

  1y 3y 5y 10y Incept.
9.49 -2.37 -0.86 1.22 2.57
Constraint Benchmark 1 (%) 9.52 -1.33 -0.39 1.93 -
  YTD 1m 3m 6m 1y 3y 5y 10y Incept.
2.74 0.94 3.70 3.48 9.49 -6.95 -4.22 12.85 70.24
Constraint Benchmark 1 (%) 3.51 1.09 4.10 3.82 9.52 -3.94 -1.92 21.09 -
  From
30-Sept-2019
To
30-Sept-2020
From
30-Sept-2020
To
30-Sept-2021
From
30-Sept-2021
To
30-Sept-2022
From
30-Sept-2022
To
30-Sept-2023
From
30-Sept-2023
To
30-Sept-2024
Total Return (%)

as of 30/Sept/2024

4.41 -1.41 -14.20 -0.94 9.49
Constraint Benchmark 1 (%)

as of 30/Sept/2024

4.31 -2.12 -12.50 0.24 9.52

The figures shown relate to past performance. Past performance is not a reliable indicator of future performance. Markets could develop very differently in the future. It can help you to assess how the fund has been managed in the past

Share Class and Benchmark performance displayed in USD, hedged share class benchmark performance is displayed in USD.

Performance is shown on a Net Asset Value (NAV) basis, with gross income reinvested where applicable. The return of your investment may increase or decrease as a result of currency fluctuations if your investment is made in a currency other than that used in the past performance calculation. Source: Blackrock

Key Facts

Key Facts

Net Assets of Fund
as of 07/Oct/2024
USD 934,337,391
Fund Launch Date
14/May/1987
Fund Base Currency
USD
Constraint Benchmark 1
FTSE World Government Bond USD Hedged Index
Initial Charge
5.00%
Management Fee
0.75
Performance Fee
0.00%
Domicile
Luxembourg
Management Company
BlackRock (Luxembourg) S.A.
Dealing Settlement
Trade Date + 3 days
Bloomberg Ticker
MLUSGUA
Share Class launch date
24/Oct/2003
Share Class Currency
USD
Asset Class
Fixed Income
SFDR Classification
Article 8
Ongoing Charges Figures
0.96%
ISIN
LU0172412149
Use of Income
Distributing
Regulatory Structure
UCITS
Morningstar Category
Global Bond - USD Hedged
Dealing Frequency
Daily, forward pricing basis
SEDOL
7659706

Portfolio Characteristics

Portfolio Characteristics

Number of Holdings
as of 30/Sept/2024
1010
Standard Deviation (3y)
as of 30/Sept/2024
6.24%
Yield to Maturity
as of 30/Sept/2024
3.29
Weighted Average YTM
as of 30/Sept/2024
3.28%
Weighted Avg Maturity
as of 30/Sept/2024
7.06
12 Month Trailing Dividend Distribution Yield
as of 30/Sept/2024
2.56
3y Beta
as of 30/Sept/2024
1.031
Modified Duration
as of 30/Sept/2024
7.20
Effective Duration
as of 30/Sept/2024
7.11
WAL to Worst
as of 30/Sept/2024
7.06

ESG Integration

ESG Integration

ESG integration is the practice of incorporating financially material environmental, social and governance (ESG) data or information into the investment decision process with the objective of enhancing risk-adjusted returns of our clients’ portfolios. Unless otherwise stated in Fund documentation or included within the Fund's investment objective, inclusion of this statement does not imply that the Fund has an ESG-aligned investment objective or strategy, but rather describes how ESG data or information is considered as part of the overall investment process.

The Fund manager includes ESG considerations in combination with other information in the research phase of the investment process. This may include relevant third-party insights, as well as internal engagement commentary and input from BlackRock Investment Stewardship on governance issues. The Fund manager conducts regular portfolio reviews with the Risk and Quantitative Analysis group and with the Chief Investment Officers. These reviews include discussion, where appropriate, of the portfolio's exposure to material ESG risks, as well as exposure to sustainability-related business involvements, climate-related metrics, and other factors.

Sustainability-related Disclosure

Sustainability-related Disclosure

This section provides sustainability-related information about the Fund, pursuant to Article 10 SFDR.

A. Summary

The Fund promotes environmental or social characteristics, but does not have as its objective sustainable investment. The Fund partially invests in Sustainable Investments. BlackRock defines Sustainable Investments as investments in issuers or securities that contribute to an environmental or social objective, do not significantly harm any of those objectives and where investee companies follow good governance practices. BlackRock refers to relevant sustainability frameworks to identify the alignment of the investment to environmental or social objectives. Sustainable Investments should also meet the do no significant harm (DNSH) requirements, as defined by applicable law and regulation. BlackRock has developed a set of criteria to assess whether an issuer or investment does significant harm. The Fund seeks to:(i) enhance exposure to investments that are deemed to have associated positive externalities and limit exposure to investments that are deemed to have associated negative externalities; and (ii) apply the BlackRock EMEA Baseline Screens.

The Fund seeks to invest in Sustainable Investments, including, but not limited to, “green bonds” (as defined by its proprietary methodology which is guided by the International Capital Markets Association Green Bond principles) and “Green, Social and Sustainability” (GSS) bonds issued by governments and agencies of, and companies, where the proceeds of such GSS bonds are tied to green and socially responsible projects. The binding elements of the investment strategy are as follows: (1) maintain that the Fund holds at least 10% in Sustainable Investments. In relation to such Sustainable Investments, at least 1% of the Fund’s total assets will be invested in Sustainable Investments with environmental objectives that are not aligned with the EU Taxonomy, and at least 1% of the Fund’s total assets will be invested in Sustainable Investments with a social objective; (2) Enhancing exposure to investments that are deemed to have associated positive externalities while limiting investments that are deemed to have associated negative externalities, compared to the Fund’s investment universe; and (3) Apply the BlackRock EMEA Baseline Screens and exclusionary screens. The Fund considers PAIs on sustainability factors through the application of the BlackRock EMEA Baseline Screens, its exclusionary policy and its holdings in green bonds.

A minimum of 70% of the Fund's total assets will be invested in investments that are aligned with the environmental and/or social characteristics. In relation to these investments, a minimum of 10% of the Fund’s total assets will be invested in Sustainable Investments, and the remainder will be invested in investments aligned with other environmental and/or social characteristics. In relation to the Sustainable Investments, at least 1% of the Fund’s total assets will be invested in Sustainable Investments with environmental objectives that are not aligned with the EU Taxonomy, and at least 1% of the Fund’s total assets will be invested in Sustainable Investments with a social objective. The remainder of the Fund’s Sustainable Investments may fluctuate between these two types of Sustainable Investment.The Fund may invest up to 30% of its total assets in other investments.The Fund does not currently commit to investing more than 0% of its assets in Sustainable Investments with an environmental objective aligned with the EU Taxonomy, however, these investments may form part of the portfolio.  

The Fund does not currently commit to invest in fossil gas and/or nuclear energy related activities that comply with the EU Taxonomy, however, these investments may form part of the portfolio.

BlackRock has developed a highly automated compliance process to help ensure that the Fund is managed in accordance with its stated investment guidelines and applicable regulatory requirements. This includes monitoring of the environmental or social characteristics of the Fund in accordance with the relevant methodology. BlackRock has developed a proprietary methodology for determining Sustainable Investments and the Fund uses a number of other methodologies to measure how the social or environmental characteristics promoted by the Fund are met.

BlackRock Portfolio Managers have access to research, data, tools, and analytics to integrate ESG insights into their investment process. ESG datasets are sourced from external third-party data providers, including but not limited to MSCI, Sustainalytics, Refinitiv, S&P and Clarity AI. BlackRock applies a comprehensive due diligence process to evaluate provider offerings with highly targeted methodology reviews and coverage assessments based on the sustainable investment strategy of the product. Data, including ESG data, received through our existing interfaces, and then processed through a series of quality control and completeness checks which seeks to ensure that data is high-quality data before being made available for use downstream within BlackRock systems and applications, such as Aladdin. BlackRock strives to capture as much reported data from companies via 3rd party data providers as practicable, however, industry standards around disclosure frameworks are still evolving, particularly with respect to forward looking indicators. As a result, in certain cases we rely on estimated or proxy measures from data providers to cover our broad investible universe of issuers.

BlackRock continues to monitor developments in the EU's ongoing implementation of its framework for sustainable investing and its investment methodologies seeking to ensure alignment as the regulatory environment changes. ESG data sets are constantly changing and improving as disclosure standards, regulatory frameworks and industry practice evolve. BlackRock continues to work with a broad range of market participants to improve data quality. Sustainable investing and understanding of sustainability is evolving along with the data environment. Industry participants face challenges in identifying a single metric or set of standardized metrics to provide a complete view on a company or an investment. BlackRock has therefore established a framework to identify sustainable investments.

BlackRock applies a high standard of due diligence in the selection and ongoing monitoring of investments made by the Fund for the purpose of compliance with the investment, liquidity and risk guidelines of the Fund, as well as the sustainability risk and ESG criteria and general performance.

Engagement with companies in which we invest our clients’ assets occurs at multiple levels within BlackRock. Where investment teams chooses to leverage engagement, this can take a variety of forms but, in essence, the portfolio management team would seek to have regular and continuing dialogue with executives or board directors of engaged investee companies to advance sound governance and sustainable business practices targeted at the identified ESG characteristics and principal adverse indicators, as well as to understand the effectiveness of the company’s management and oversight of activities designed to address the identified ESG issues. Engagement also allows the portfolio management team to provide feedback on company practices and disclosures.

There is no specific index designated as a reference benchmark to determine whether this Fund is aligned with the environmental and/or social characteristics that it promotes.

B. No sustainable investment objective

This financial product promotes environmental or social characteristics, but does not have as its objective sustainable investment.

Sustainable Investments meet the DNSH requirements, as defined by applicable law and regulation. BlackRock has developed a set of criteria across all Sustainable Investments to assess whether an issuer or investment does significant harm. Investments considered to be causing significant harm do not qualify as Sustainable Investments.

The indicators for adverse impacts on sustainability factors for each type of investment are assessed using BlackRock’s Sustainable Investments proprietary methodology. BlackRock uses third-party data and/or fundamental analysis to identify investments which negatively impact sustainability factors and cause significant harm.

Sustainable Investments are assessed to consider any detrimental impacts and ensure compliance with international standards of the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights . Issuers deemed to have violated these conventions are not considered as Sustainable Investments.

C. Environmental or social characteristics of the financial product

The Fund invests a minimum of 10% of its total assets in Sustainable Investments across environmental and social objectives. BlackRock defines Sustainable Investments as investments in issuers or securities that contribute to an environmental or social objective, do not significantly harm any of those objectives and where investee companies follow good governance practices. BlackRock refers to relevant sustainability frameworks to identify the alignment of the investment to environmental or social objectives.

Sustainable Investments should also meet the do no significant harm (DNSH) requirements, as defined by applicable law and regulation. BlackRock has developed a set of criteria to assess whether an issuer or investment does significant harm.

The Investment Adviser will employ a proprietary methodology to assess investments based on the extent to which they are associated with positive or negative externalities, that is environmental and social benefits or costs as defined by the Investment Adviser. The Investment Adviser will seek to enhance exposure to investments that are deemed to have associated positive externalities (e.g. lower carbon emitting issuers and issuers with positive ESG credentials) and seek to limit exposure to investments that are deemed to have associated negative externalities (e.g. higher carbon emitters, issuers with certain controversial business practices, and issuers with negative ESG credentials). The assessment of the level of involvement in each activity may be based on percentage of revenue, a defined total revenue threshold, or any connection to a restricted activity regardless of the amount of revenue received.

The Fund applies the BlackRock EMEA Baseline Screens. This set of screens seeks to avoid exposures that have negative environmental outcomes by excluding direct investment in issuers that have material involvement in thermal coal and tar sands extraction, as well as thermal coal-based power generation. Negative social outcomes are also avoided by excluding direct investment in issuers involved in controversial weapons and nuclear weapons, and material involvement in production and distribution of civilian firearms and tobacco. This Fund also excludes issuers deemed to have failed to comply with the 10 UN Global Compact Principles, which cover human rights, labour standards, the environment, and anti-corruption.

The Fund does not use a reference benchmark for the purposes of attaining the ESG characteristics that it promotes, however, FTSE World Government Bond USD Hedged Index (the “Index”) is used to compare certain ESG characteristics promoted by the Fund.

D. Investment strategy

The Fund seeks to invest in Sustainable Investments, including, but not limited to, “green bonds” (as defined by its proprietary methodology which is guided by the International Capital Markets Association Green Bond principles) and “Green, Social and Sustainability” (GSS) bonds issued by governments and agencies of, and companies, where the proceeds of such GSS bonds are tied to green and socially responsible projects.

The Fund will apply the BlackRock EMEA Baseline Screens.

The Investment Adviser will also employ a proprietary methodology to assess investments based on the extent to which they are associated with positive or negative externalities, that is environmental and social benefits or costs as defined by the Investment Adviser. The Investment Adviser will seek to enhance exposure to investments that are deemed to have associated positive externalities (e.g. lower carbon emitting issuers and issuers with positive ESG credentials) and seek to limit exposure to investments that are deemed to have associated negative externalities (e.g. higher carbon emitters, issuers with certain controversial business practices, and issuers with negative ESG credentials).

The assessment of the level of involvement in each activity may be based on percentage of revenue, a defined total revenue threshold, or any connection to a restricted activity regardless of the amount of revenue received.

The remaining issuers (i.e. those issuers which have not yet been excluded from investment by the Fund) are then evaluated by the Investment Adviser based on, among other factors, their ability tomanage the risks and opportunities associated with ESG compliant business practices and their ESG risk and opportunity credentials, such as their leadership and governance framework, which is considered essential for sustainable growth, their ability to strategically manage longer-term issues surrounding ESG and the potential impact this may have on an issuer’s financials. To undertake this analysis, the Investment Adviser may use data provided by external ESG Providers, proprietary models and local intelligence and may undertake site visits.

The binding elements of the investment strategy are as follows:
1. Maintain that the Fund holds at least 10% in Sustainable Investments. In relation to such Sustainable Investments, at least 1% of the Fund’s total assets will be invested in Sustainable Investments with environmental objectives that are not aligned with the EU Taxonomy, and at least 1% of the Fund’s total assets will be invested in Sustainable Investments with a social objective.
2. Enhancing exposure to investments that are deemed to have associated positive externalities, compared to the Fund's ESG Reporting Index while limiting investments that are deemed to have associated negative externalities.
3. Apply the BlackRock EMEA Baseline Screens.

Consideration of principal adverse impacts on sustainability factors

The Fund considers PAIs on sustainability factors through the application of the BlackRock EMEA Baseline Screens, its exclusionary policy and its holdings in green bonds.

The Fund takes into account the following PAIs:
• GHG emissions
• GHG intensity of investee companies
• Exposure to companies active in the fossil fuel sector
• Energy consumption intensity per high impact climate secto r
• Violations of UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises
• Lack of processes and compliance mechanisms to monitor compliance with UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises
• Exposure to controversial weapons (anti personnel mines, cluster munitions, chemical weapons and biological weapons)

In addition, this Fund takes into account the PAIs through BlackRock’s DNSH standard for Sustainable Investments. This Fund will provide information on the PAIs in its annual report.

Good governance policy

BlackRock assesses good governance practices of the investee companies by combining proprietary insights and shareholder engagement by the Investment Adviser, with data from external ESG research providers. BlackRock uses data from external ESG research providers to initially identify issuers which may not have satisfactory governance practices in relation to key performance indicators (KPIs) related to sound management structure, employee relations, remuneration of staff and tax compliance.

Where issuers are identified as potentially having issues with regards to good governance, the issuers are reviewed to ensure that, where the Investment Adviser agrees with this external assessment, the Investment Adviser is satisfied that the issuer has either taken remediation actions or will take remedial actions within a reasonable time frame based on the Investment Adviser’s direct engagement with the issuer. The Investment Adviser may also decide to reduce exposure to such issuers.

E. Proportion of Investments

A minimum of 70% of the Fund’s total assets will be invested in investments that are aligned with the environmental and/or social characteristics. In relation to these investments, a minimum of 10% of the Fund’s total assets will be invested in Sustainable Investments, and the remainder will be invested in investments aligned with other environmental and/or social characteristics.

In relation to the Sustainable Investments, at least 1% of the Fund’s total assets will be invested in Sustainable Investments with environmental objectives that are not aligned with the EU Taxonomy, and at least 1% of the Fund’s total assets will be invested in Sustainable Investments with a social objective. The remainder of the Fund’s Sustainable Investments may fluctuate between these two types of Sustainable Investment.

The Fund may invest up to 30% of its total assets in other investments.

The Fund may use derivatives for investment purposes and for the purposes of efficient portfolio management. For derivatives, any ESG rating or analyses referenced above will apply only to the underlying investment.

The Fund does not currently commit to investing more than 0% of its assets in Sustainable Investments with an environmental objective aligned with the EU Taxonomy, however, these investments may form part of the portfolio.

The Fund does not currently commit to invest in fossil gas and/or nuclear energy related activities that comply with the EU Taxonomy, however, these investments may form part of the portfolio.

The Fund does not commit to making investments in transitional and enabling activities, however, these investments may form part of the portfolio.

A minimum of 1% of the Fund’s total assets will be invested in Sustainable Investments with environmental objectives that are not aligned with the EU Taxonomy.

The Fund invests in Sustainable Investments that are not aligned with the EU Taxonomy for the following reasons: (i) it is part of the investment strategy of the Fund; (ii) data to determine EU Taxonomy-alignment may be unavailable; and / or (iii) underlying economic activities may not be eligible under the EU Taxonomy’s available technical screening criteria or may not comply with all requirements set out in such technical screening criteria.

A minimum of 1% of the Fund’s total assets will be invested in Sustainable Investments with a social objective.

Other holdings are limited to 30% and may include derivatives, cash and near cash instruments and shares or units of CIS and fixed income transferable securities (also known as debt securities) issued by governments and agencies worldwide.

These investments may be used for investment purposes in pursuit of the Fund’s (non ESG) investment objective, for the purposes of liquidity management and/or hedging.

No other holdings are considered against minimum environmental or social safeguards.

F. Monitoring of enviromental or social characteristics

BlackRock has developed a highly automated compliance process to help ensure that the Fund is managed in accordance with its stated investment guidelines and applicable regulatory requirements. This includes monitoring of the environmental or social characteristics of the Fund in accordance with the relevant methodology as described in "Methodologies for environmental and social characteristics" section.

Portfolio Managers have the primary responsibility for complying with the contractual terms of the prospectus and other governing documents for the Fund and are supported by Aladdin, BlackRock’s portfolio and risk management software.

The Portfolio Compliance Group (“PCG”), a group within BlackRock’s Business Operations, is responsible for the coding of the Fund’s investment restrictions, that are capable of being coded, within BlackRock’s pre and post trade compliance monitoring system in Aladdin. Where an investment restriction cannot be coded, a manual process is established for guidelines testing.

Pre-Trade & Post Trade Monitoring

When a trade or order is created, the transaction is reviewed against the Fund’s investment guidelines by the front-end compliance system on a real time basis prior to execution. If a non-compliant condition is detected, the trade or order will be unable to progress further.

Compliance tests are also run on a post trade basis overnight based on the end-of-day positions and reported on a T+1 basis. Compliance exceptions and warnings are identified and escalated for investigation to relevant investment professionals, who will engage with relevant subject matter experts as appropriate to resolve. Identification and investigation of potential items is recorded on an electronic system that contains a comprehensive workflow which provides an audit trail. Appropriate corrective action will be taken as needed to resolve exceptions.

The monitoring of certain ESG characteristics may not be able to be automated due to system functionality or data limitations. Such ESG characteristics are subject to periodic review and monitoring, to ensure that the product adheres to the related commitments.

Breaches are reported as required under our regulatory obligations to the revelant management company, auditor, depositary and regulator.

Where BlackRock delegates part of the management of a Fund to a third-party manager, the third-party manager is responsible for ensuring compliance with the investment guidelines and investment restrictions as per the agreed Investment Manage Agreement in place, including those pertaining to the environmental or social characteristics for the Fund. The investment restrictions pertaining to the environmental or social characteristics are generally communicated to the third-party manager which may updated by BlackRock from time to time in line with the environmental and social characteristics of the Fund. When the third-party manager runs a passive strategy, the third-party manager may also monitor whether the environmental or social characteristics are met by tracking a benchmark index embedding these characteristics in its methodology. BlackRock receives a daily feed of the positions held by the third-party manager and runs post-trade compliance checks in accordance with the back-end compliance process previously described. BlackRock also undertakes periodic due diligence on third party manager to ensure the monitoring frameworks in place remain appropriate.

G. Methodologies

BlackRock has adopted the following methodologies in respect of this Fund:

1. The Fund applies the BlackRock EMEA Baseline Screens with the Fundamental Insights methodology. Further details on the BlackRock EMEA Baseline Screens with Fundamental Insights methodology are available at: https://www.blackrock.com/corporate/literature/publication/blackrock-baseline-screens-in-europe-middleeast-and-africa.pdf

BlackRock has developed a proprietary methodology for determining Sustainable Investments which is broken down into a four-part assessment:
(i) Economic activity contribution to environmental and/or social objectives;
(ii) Do no significant harm;
(iii) Meets minimum safeguards; and
(iv) Good governance (where relevant).

It is necessary for an investment to meet all four limbs of this test to be considered a Sustainable Investment. Sustainable Investments are subject to a robust oversight process to ensure that regulatory standards are met.

(i) Economic activity contribution to environmental and/or social objectives

Environmental and social objectives
The Fund invests in Sustainable Investments which contribute to a range of environmental and / or social objectives which may include but are not limited to alternative and renewable energy, energy efficiency, pollution prevention or mitigation, reuse and recycling, health, nutrition, sanitation and education and the UN Sustainable Development Goals (“Environmental and Social Objectives”).

Economic activity assessment
An investment will be a Sustainable Investment (subject to it satisfying the other three limbs):

Business activity
• Where more than 20% of its revenue attributable to products and/or services is systematically mapped as contributing to Environmental and/or Social Objectives using third-party vendor data. Fundamental analysis may also be used to assess a company where there is no third-party vendor data or where an analyst determines that the data is inaccurate or that there is a more appropriate materiality metric than revenue for identifying a company’s contribution such as capital expenditure or recycled inputs.

Business practices
• Where the issuer has set a de-carbonization target in accordance with the Science Based Targets initiatives as validated by third-party vendor data or by way of fundamental assessment. • Demonstrable leadership attribute that evidences a company’s critical role as an enabler of sustainable practices.

Fixed income securities
• A use-of-proceeds bond will be a Sustainable Investment where the use of proceeds substantially contributes to an Environmental and/or Social Objective as determined by fundamental assessment
• Other fixed income securities will be a Sustainable Investment where the security is aligned with Environmental and/or Social Objectives as determined by fundamental assessment such as environmental and/or social asset-backed and mortgage-backed securities issued by supranational entities committed to the promotion of UN SDGs

(ii) Do no significant harm (DNSH)

Sustainable Investments meet the DNSH requirements, as defined by applicable law and regulation. BlackRock has developed a set of criteria across all Sustainable Investments to assess whether an investment does significant harm which consider both third party data points as well as fundamental insights. Investments are screened against these criteria using system-based controls and any which are considered to be causing significant harm do not qualify as Sustainable Investments. BlackRock assesses the indicators for adverse impacts on sustainability factors for each type of investment as defined by the regulation.

Climate principal adverse impact indicators will be assessed using BlackRock’s proprietary Heightened Scrutiny Framework which identifies investments which present significant climate-related risk by assessing: (i) carbon emissions; (ii) readiness for the net zero transition; and (iii) climate-related disclosures.

All other indicators for adverse impacts are assessed using third-party vendor data on controversies to exclude investments which BlackRock has determined are harmful to sustainability indicators subject to limited exceptions, for example, where the data is determined to be inaccurate or not up to date.

Where no data is available, or it is substantially incomplete, fundamental analysis will be undertaken using reasonable efforts to identify impacts which BlackRock determines to be harmful to the sustainability indicators.

(iii) Meet minimum safeguards

Sustainable Investments are assessed using third party data provider information to consider compliance with international standards of the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights. Issuers deemed to have violated these conventions are not considered as Sustainable Investments.

(iv) Good Governance

In respect of its good governance assessment BlackRock uses data from external third-party ESG research providers to initially identify issuers which may not have satisfactory governance practices in relation to key performance indicators (KPIs) related to the criteria outlined above. Where issuers are identified as potentially having issues with regards to good governance, the issuers are reviewed to ensure that, where the Investment Advisor/Manager agrees with this external assessment, the Investment Advisor/Manager is satisfied that the issuer has either taken remediation actions or will take remedial actions within a reasonable time frame based on the Investment Advisor’s/Manager’s direct engagement with the issuer. The Investment Advisor/Manager may also decide to reduce exposure to such issuers. Funds’ indirect exposures to issuers with good governance failings are limited to de minimis levels by internal controls and are also monitored on a periodic basis to ensure that this indirect exposure remains at de minimis levels

Other methodologies

In addition, the following methodologies are used to measure how the social or environmental characteristics promoted by the Fund are met:
1. The Fund employs a proprietary methodology to assess investments based on the extent to which they are associated with positive or negative externalities. Further details on this proprietary methodology are available at: https://www.blackrock.com/us/individual/insights/blackrock-investment-institute/esg-fixed-income
2. The Fund applies the BlackRock EMEA Baseline Screens. Further details on the BlackRock EMEA Baseline Screens methodology, including data sources and limitations are available at: https://www.blackrock.com/corporate/literature/publication/blackrock-baseline-screens-in-europe-middleeast-and-africa.pdf

The Fund via the environmental and/or social characteristics of its strategy has been assessed as considering a set of principal adverse impact indicators (PAIs) as defined within the SFDR Regulatory Technical standards. We have assessed whether and how these are fully or partially considered and outline how those characteristics map to those PAIs in our pre contractual and periodic reporting.

H. Data sources and processing

Data Sources Uses

BlackRock Portfolio Managers have access to research, data, tools, and analytics to integrate ESG insights into their investment process. Aladdin is the operating system that connects the data, people, and technology necessary to manage portfolios in real time, as well as the engine behind BlackRock’s ESG analytics and reporting capabilities. BlackRock’s Portfolio Managers use Aladdin to make investment decisions, monitor portfolios and to access material ESG insights that can inform the investment process to attain ESG characteristics of the Fund.

ESG datasets are sourced from external third-party data providers, including but not limited to MSCI, Sustainalytics, Refinitiv, S&P and Claritfy AI. These datasets may include headline ESG scores, carbon emissions data, business involvement metrics or controversies and have been incorporated into Aladdin tools that are available to Portfolio Managers and employed in BlackRock investment strategies. Such tools support the full investment process, from research, to portfolio construction and modelling, to reporting.

Measures taken to ensure Data Quality

BlackRock applies a comprehensive due diligence process to evaluate provider offerings with highly targeted methodology reviews and coverage assessments based on the sustainable investment strategy (and the environmental and social characteristics or sustainable objective) of the product. Our process entails both qualitative and quantitative analysis to assess the suitability of data products in line with regulatory standards as applicable.

We assess ESG providers and data across five core areas outlined below:
1. Data Collection: this includes but is not limited to assessing the data providers underlying data sources, technology used to capture data, process to identify misinformation and any use of machine learning or human data collection approaches. We will also consider planned improvements
2. Data Coverage: our assessment includes but is not limited to the extent to which a data package provides coverage across our investible universe of issuers and asset classes. This will include consideration of the treatment of parent companies and their subsidiaries as well as use of estimated data or reported data
3. Methodology: our assessment includes but is not limited to consideration of the third-party providers methodologies employed, including considering the collection and calculation approaches, alignment to industry or regulatory standards or frameworks, materiality thresholds and their approach to data gaps.
4. Data Verification: our assessment will includes but is not limited to the third party providers’ approaches to verification of data collected and quality assurance processes including their engagement with issuers
5. Operations: we will assess a variety of aspects of a data vendors operations, including but not limited to their policies and procedures (including consideration of any conflicts of interest) the size and experience of their data research teams, their training programs, and their use of third-party outsourcers

Additionally, BlackRock, actively participates in any relevant provider consultations regarding proposed changes to methodologies as they it pertains to third party data sets or index methodologies and submits considered feedback and recommendations to data provider technical teams. BlackRock often has ongoing engagement with ESG data providers including index providers to keep abreast of industry developments.

How data is processed

At BlackRock, our internal processes are focused on delivering high-quality standardized and consistent data to be used by investment professionals and for transparency and reporting purposes. Data, including ESG data, received through our existing interfaces, and then processed through a series of quality control and completeness checks which seeks to ensure that data is of a high-quality before being made available for use downstream within BlackRock systems and applications, such as Aladdin. BlackRock’s integrated technology enables us to compile data about issuers and investments across a variety of environmental, social and governance metrics and a variety of data providers and make those available to investment teams and other support and control functions such as risk management.

Use of Estimated Data

BlackRock strives to capture as much reported data from companies via 3rd party data providers as practicable, however, industry standards around disclosure frameworks are still evolving, particularly with respect to forward looking indicators. As a result, in certain cases we rely on estimated or proxy measures from data providers to cover our broad investible universe of issuers. Due to current challenges in the data landscape, while BlackRock relies on material amount of estimated data across our investible universe, the levels of which may vary from data set to data set, we seek to ensure that use of estimates is in line with regulatory guidance and that we have necessary documentation and transparency from data providers on their methodologies. BlackRock recognizes the importance in improving its data quality and data coverage and continues to evolve the data sets available to its investment professionals and other teams. Where required by local country-level regulations, funds may state explicit data coverage levels

I. Limitations to methodologies and data

Limitations to Methodology

Sustainable investing is an evolving space, both in terms of industry understanding but also the regulatory frameworks on both a regional and global basis. BlackRock continues to monitor developments in the EU's ongoing implementation of its framework for sustainable investing and is seeking to evolve its investment methodologies to ensure alignment as the regulatory environment changes. As a result, BlackRock may update these disclosures, and the methodologies and sources of data used, at any time in the future as market practice evolves or further regulatory guidance becomes available.

The UN Sustainable Development Goals and sub-targets are used by BlackRock as a list of environmental and/or social objectives. Any assessment will be undertaken strictly in accordance with the methodology set out in the Prospectus. Assumptions associated with the conventional use of the SDGs are not considered as part of the assessment including but not limited to applicable geographical limitations and those commitments that may be limited by time or scope, such as goals that may be applicable only to governments.

Limitations in relation to the data sources are noted below.

Limitations to Data

ESG data sets are constantly changing and improving as disclosure standards, regulatory frameworks and industry practice evolve. BlackRock continues to work with a broad range of market participants to improve data quality.

Whilst each ESG metric may come with its own individual limitations, data limitations may broadly be considered to include, but not be limited to:
• Lack of availability of certain ESG metrics due to differing reporting and disclosure standards impacting issuers, geographies or sectors
• Nascent statutory corporate reporting standards regarding sustainability leading to differences in the extent to which companies themselves can report against regulatory criteria and therefore some metric coverage levels may be low
• Inconsistent use and levels of reported vs estimated ESG data across different data providers, taken at varied time periods which makes comparability a challenge. Estimated data by its nature may vary from realized figures due to the assumptions or hypothesis employed by data providers.
• Differing views or assessments of issuers due to differing provider methodologies or use of subjective criteria
• Most corporate ESG reporting and disclosure takes place on an annual basis and takes significant time to produce meaning that this data is produced on a lag relative to financial data. There may also inconsistent data refresh frequencies across different data providers incorporating such data into their data sets.
• Coverage and applicability of data across asset classes
Forward looking data, such as climate related targets may vary significantly from historic and current point in time metrics

For more information about how metrics that are presented with sustainability indicators are calculated, please see the Fund's annual report.

Sustainable Investments and Environmental and Social criteria

Sustainable investing and understanding of sustainability is evolving along with the data environment.  Industry participants face challenges in identifying a single metric or set of standardized metrics to provide a complete view on a company or an investment.  BlackRock has therefore established a framework to identify sustainable investments, taking into account the regulatory requirements. 

BlackRock uses third-party vendor data in assessing whether investments cause significant harm and have good governance practices. There may be some circumstances where data is unavailable, incomplete, or inaccurate, in which case fundamental assessments may be undertaken, taking a proportionate approach and using reasonable efforts, to identify issues likely to have a significant impact. Despite reasonable efforts, information may not always be available in which case a subjective assessment will be made based on BlackRock's knowledge of the investment or industry. In certain cases data may reflect actions that issuers may have taken only after the fact, and do not reflect all potential instances of significant harm.

J. Due Diligence

BlackRock applies a high standard of due diligence in the selection and ongoing monitoring of investments made by the Fund for the purpose of compliance with the investment, liquidity and risk guidelines of the Fund, as well as the sustainability risk and ESG criteria and general performance. Portfolio Managers are subject to pre and post trade controls within the investment platform where the funds promote environmental or social characteristics, integrate sustainability into the investment process in a binding manner or have a sustainable investment objective. The Investment Oversight team conducts due diligence engagement with the portfolio managers and oversees internal restrictions that may expand upon requirements set out in the fund prospectus. The Portfolio Managers also comply with related EMEA policies, including Investment Due Diligence policies which have been updated to integrate sustainability risk. Legal and Compliance have implemented a framework to ensure that the relevant policies and procedures are adopted and complied with by all employees, including Portfolio Managers.

The Investment Adviser integrates sustainability risks into the investment due diligence process of the Fund. The portfolio managers of the Fund are primarily responsible for considering sustainability risks. They are subject to an oversight framework within the Investment Adviser and BlackRock's risk management function, RQA group also provides independent reviews of sustainability risks and the compliance team provides further oversight and monitors the ESG requirements relevant to each fund and the investment restrictions for each fund. RQA, serves as the second line of defence in BlackRock’s risk management framework. RQA is responsible for BlackRock’s Investment and Enterprise risk management framework which includes oversight of sustainability-related investment risks. RQA Investment Risk conducts regular reviews with portfolio managers to ensure investment teams are advised of relevant sustainability risks, complementing the first-line monitoring and oversight of sustainability considerations across our investment platform. RQA also has a dedicated Sustainability Risk Team that partners with risk managers and businesses to reinforce this constructive engagement. RQA collaborates with working groups throughout the Investments Platform and with Aladdin Sustainability Lab to advance the firm’s sustainability toolkit through consultation on firmwide data, modelling, methodologies, and analytics. In addition, BlackRock makes data relating to principal adverse impacts available to all portfolio managers and BlackRock integrates consideration of the principle adverse impacts of investment decisions on sustainability factors in the investment due diligence process. For further information, please see ‘Section D – Investment strategy’ above.

K. Engagement Policies

The Fund

The Fund does not use engagement as a means of meeting its binding commitments to environmental or social characteristics or sustainable investment objectives.

Engagement may form part of the Due Diligence carried out by the portfolio management team for funds pursuing Fixed Income investment strategies in order to assess how companies manage ESG risks and opportunities and how these impact companies financials. Where applicable, we use engagement to discuss concerns, understand opportunities and share constructive feedback, based on the view that material ESG issues are intractably tied to a business’s long term strategy and fundamental value. Engagement may be undertaken in collaboration with the Business Investment Stewardship team however, this is not always the case and can be undertaken directly. The Fixed Income portfolio management team may also use engagement with corporate treasurers when they are in the process of issuing green and social bonds to ensure a robust issuance.

General

Engagement with companies in which we invest our clients’ assets occurs at multiple levels within BlackRock. 

Where engagement is specifically identified by a particular portfolio management team as one of the means by which they seek to demonstrate a commitment to environment, social and governance issues within the context of SFDR, the methods by which the effectiveness of such engagement policy and the ways in which such an engagement policy may be adapted in the event that they do not achieve the desired impact (usually expressed as a reduction in specified principal adverse indicators) would be described in the prospectus and website disclosures particular to that fund. 

Where investment teams chooses to leverage engagement, this  can take a variety of forms but, in essence, the portfolio management team would seek to have regular and continuing dialogue with executives or board directors of engaged investee companies to advance sound governance and sustainable business practices targeted at the identified ESG characteristics and principal adverse indicators, as well as to understand the effectiveness of the company’s management and oversight of activities designed to address the identified ESG issues. Engagement also allows the portfolio management team to provide feedback on company practices and disclosures.

Where a relevant portfolio management team has concerns about a company’s approach to the identified ESG characteristics and/or principal adverse indicators, they may choose to explain their expectations to the company’s board or management and may signal through voting at general meetings that they have outstanding concerns, generally by voting against the re-election of directors they view as having responsibility for improvements in the identified ESG characteristics or principal adverse indicators.

Separate from the activities of any particular portfolio management team, at the highest level, as part of its fiduciary approach, BlackRock has determined that it is in the best long-term interest of its clients to promote sound corporate governance as an informed, engaged shareholder. At BlackRock, this is the responsibility of BlackRock Investment Stewardship. Principally through the work of BIS team, BlackRock meets the requirements in the Shareholder Rights Directive II (‘SRD II”) relating to engagement with public companies and other parties in the investment ecosystem.  A copy of BlackRock’s SRD II engagement policy can be found at https://www.blackrock.com/corporate/literature/publication/blk-shareholder-rights-directiveii-engagement-policy-2022.pdf.

BlackRock’s approach to investment stewardship is outlined in the BIS Global Principles and market-level voting guidelines. The BIS Global Principles set out our stewardship philosophy and our views on corporate governance and sustainable business practices that support long-term value creation by companies. We recognize that accepted standards and norms of corporate governance differ between markets; however, we believe there are certain fundamental elements of governance practice that are intrinsic globally to a company’s ability to create long-term value. Our market-specific voting guidelines provide detail on how BIS implements the Global Principles – taking into consideration local market standards and norms – and inform our voting decisions in relation to specific ballot items for shareholder meetings.  BlackRock’s overall approach to investment stewardship and engagement can be found at: https://www.blackrock.com/uk/professionals/solutions/shareholder-rights-directive and https://www.blackrock.com/corporate/about-us/investment-stewardship

In undertaking its engagement, BIS may focus on particular ESG themes, which are outlined in BlackRock’s voting priorities https://www.blackrock.com/corporate/literature/publication/blk-stewardship-priorities-final.pdf

L. Designated reference benchmark

There is no specific index designated as a reference benchmark to determine whether this financial product is aligned with the environmental and/or social characteristics that it promotes. However, please note that the FTSE World Government Bond USD Hedged Index is used to compare certain ESG characteristics promoted by the Fund.

Risk Indicator

Risk Indicator

1
2
3
4
5
6
7
Low Risk High Risk
Typically low rewards Typically high rewards

Ratings

Ratings

Morningstar Medalist Rating

Morningstar Medalist Rating - BRONZE
Morningstar has awarded the Fund a Bronze medal. (Effective 31/Aug/2024)
Analyst-Driven % as of 31/Aug/2024
55.00
Data Coverage % as of 31/Aug/2024
100.00

Holdings

Holdings

as of 30/Sept/2024
Name Weight (%)
GERMANY (FEDERAL REPUBLIC OF) 1.3 10/15/2027 8.81
TREASURY NOTE 4.625 06/30/2026 4.38
UK CONV GILT 4.125 07/22/2029 2.56
SPAIN (KINGDOM OF) 3.5 05/31/2029 1.76
TREASURY NOTE 4.25 06/30/2029 1.54
Name Weight (%)
JAPAN (GOVERNMENT OF) 10YR #369 0.5 12/20/2032 1.31
SPAIN (KINGDOM OF) 0 01/31/2027 1.26
JAPAN (GOVERNMENT OF) 20YR #182 1.1 09/20/2042 1.23
CHINA PEOPLES REPUBLIC OF (GOVERNM 2.75 02/17/2032 1.15
JAPAN (GOVERNMENT OF) 5YR #157 0.2 03/20/2028 1.12
Holdings subject to change

Exposure Breakdowns

Exposure Breakdowns

as of 30/Sept/2024

% of Market Value

Type Fund Benchmark Net
as of 30/Sept/2024

% of Market Value

Type Fund Benchmark Net
as of 30/Sept/2024

% of Market Value

Type Fund Benchmark Net
as of 30/Sept/2024

% of Market Value

Type Fund Benchmark Net
as of 30/Sept/2024

% of Market Value

Type Fund Benchmark Net
Negative weightings may result from specific circumstances (including timing differences between trade and settle dates of securities purchased by the funds) and/or the use of certain financial instruments, including derivatives, which may be used to gain or reduce market exposure and/or risk management. Allocations are subject to change.

Pricing & Exchange

Pricing & Exchange

Investor Class Currency NAV NAV Amount Change NAV % Change NAV As Of 52wk High 52wk Low ISIN
Class A3 USD 19.74 -0.08 -0.40 07/Oct/2024 20.06 18.41 LU0172412149
Class A1 USD 19.71 -0.08 -0.40 07/Oct/2024 20.01 18.36 LU0118256485
Class D2 USD 31.26 -0.12 -0.38 07/Oct/2024 31.67 28.29 LU0540001038
Class D3 Hedged EUR 15.43 -0.06 -0.39 07/Oct/2024 15.89 14.82 LU0827881821
Class A3 Hedged GBP 8.80 -0.03 -0.34 07/Oct/2024 8.94 8.24 LU1484781395
Class D2 Hedged EUR 24.86 -0.10 -0.40 07/Oct/2024 25.22 22.90 LU0329591563
Class A3 Hedged HKD 89.97 -0.36 -0.40 07/Oct/2024 91.50 84.83 LU1484781478
Class I4 Hedged EUR 8.53 -0.03 -0.35 07/Oct/2024 8.86 8.08 LU1811366183
Class A2 Hedged EUR 23.35 -0.10 -0.43 07/Oct/2024 23.69 21.58 LU0297942863
Class D3 USD 19.76 -0.08 -0.40 07/Oct/2024 20.08 18.43 LU0827882043
Class A1 Hedged EUR 15.74 -0.06 -0.38 07/Oct/2024 16.03 14.91 LU0297940495
Class X2 USD 11.30 -0.05 -0.44 07/Oct/2024 11.45 10.18 LU0462857607
Class A2 USD 29.73 -0.11 -0.37 07/Oct/2024 30.13 27.00 LU0006061385
Class I2 Hedged EUR 8.74 -0.03 -0.34 07/Oct/2024 8.86 8.04 LU0368232830
Class A3 Hedged EUR 15.61 -0.06 -0.38 07/Oct/2024 15.92 14.81 LU0297943168

Portfolio Managers

Portfolio Managers

Russell Brownback
Managing Director, Head of Global Macro Positioning for Fixed-Income

  

Chi Chen
Director, Portfolio Manager

  

Aidan Doyle, CFA
Managing Director, Portfolio Manager

  

Dylan Price
Dylan Price
Sam Summers
Director, Portfolio Manager

   

Literature

Literature