OVERVIEW
The iShares ‘Sustainable options’ feature is designed to help investors learn about sustainable iShares funds that may help them meet their financial and sustainable investment goals. It highlights the iShares sustainable funds that could be considered as ‘sustainable options’, in relation to traditional iShares funds. As many factors could influence a decision about which product is best suited for a given investment goal, this information should not be relied upon exclusively when evaluating various investment options.
HOW ‘SUSTAINABLE OPTIONS’ ARE DETERMINED
A ‘Sustainable option’ must meet one of two criteria, outlined below. In addition, an internal review helps to ensure only relevant options are displayed.
1.The traditional fund’s benchmark index and the parent index of the sustainable fund’s benchmark index are shared
Funds can be associated based on a shared parent index. 'Parent index' refers to the index from which an ETF benchmark index is derived. A sustainable fund that shares a parent index with a traditional fund’s benchmark index, can be considered a ‘sustainable option’ in relation to the traditional fund.
Example:
Traditional fund: iShares Core MSCI Europe UCITS ETF EUR (Acc), and:
Sustainable option: iShares MSCI Europe ESG Enhanced UCITS ETF EUR (Acc)
In this example, the sharing of ‘MSCI Europe index’ as the traditional fund’s benchmark index and the parent index of the sustainable fund’s benchmark index connects the two funds.
2.The traditional fund’s benchmark index and the parent index of the sustainable fund’s benchmark index have a correlation of above 0.9
An association between two funds can be established based on the correlation of a traditional fund’s benchmark index and the parent index of the sustainable fund’s benchmark index.
Correlation is used as it can identify the degree of similarity in the performance and risk profile between two indices. Correlation measures the degree to which two or more things move in relation to one another over a specified period of time (a 1-year period for the purposes of this methodology) in a range of 0-1.0. A higher number means a higher correlation. Therefore, a parent index of a sustainable fund’s benchmark index that has a correlation of above 0.9 to a traditional fund’s benchmark index is considered a ‘sustainable option’ in relation to the traditional fund.
Example (based correlation analysis of MSCI Japan IMI index and MSCI Japan index):
Traditional fund: iShares Core MSCI Japan IMI UCITS ETF USD (Acc) and:
Sustainable option: iShares MSCI Japan ESG Enhanced UCITS ETF USD (Acc)
In this example, MSCI Japan IMI index and MSCI Japan index have a correlation of above 0.9 (based on the most recent calculation period).
The correlation analysis is based on daily performance data over a one-year period, as of 31st May 2021. Correlations are recalculated semi-annually for existing ‘sustainable options’ and on an ad hoc basis for new fund inclusions (qualifying under criteria 2). If a correlation no longer exceeds 0.9, the ‘sustainable option’ association will be removed.
SHARE CLASS AND DISTRIBUTION METHOD
‘Sustainable option’ funds that have the same share class characteristics and distribution methods with the traditional fund will always be shown when available. Only where this is not available will a fund with different distribution method or share class be used.
MULTIPLE SUSTAINABLE OPTIONS
Multiple ‘sustainable options’ can be shown in relation to a single traditional fund.
Example:
‘iShares Core MSCI Europe UCITS ETF EUR (Acc)’ is associated with three ‘sustainable options’:
1. iShares MSCI Europe ESG Screened UCITS ETF EUR (Acc)
2. iShares MSCI Europe ESG Enhanced UCITS ETF EUR (Acc)
3. iShares MSCI Europe SRI UCITS ETF EUR (Acc)
'Traditional ETFs' are ETFs that fall outside of the sustainable product range, an ETF that doesn't have a sustainable strategy as its focus, aka non-sustainable.
'Parent index' refers to the index from which an ETF benchmark index is derived; please see the index provider’s website for further information on how the parent and ETF benchmark indices are constructed.
‘Sustainable options’ will only be shown for single traditional funds.
There will be no ‘sustainable options’ shown for other sustainable funds.
There will be no ‘sustainable options’ shown for multiple traditional funds.
