BlackRock has expanded its Paris-Aligned Benchmark (PAB) ETF range with the launch of two high-yield bond ETFs.
The iShares € High Yield Corp Bond ESG Paris-Aligned Climate UCITS ETF (HYPE) and the iShares $ High Yield Corp Bond ESG Paris-Aligned Climate UCITS ETF (HYDP) are listed on the Euronext Amsterdam with total expense ratios (TERs) of 0.25%.
The ETFs track US dollar and euro-denominated Bloomberg MSCI Corporate High Yield Climate Paris-Aligned ESG Select indices.
Targeting the PAB, the indices will target a 50.5% reduction of carbon emissions versus the parent universe, followed by a 7.7% decarbonisation year-on-year.
This will also include business involvement screens, excluding companies involved in coal, oil and gas, electricity generating, controversial weapons and United Nations Global Compact violators.
Following this, an optimisation process is applied which is designed to “minimise tracking error and turnover” while meeting the PAB decarbonising requirements.
The ETFs will also aim to achieve an improved sustainability profile versus the parent indices by using data such as green revenues, ESG score, and a minimum weight to sustainable investments.
Issuers in the index will be capped at 4.5% and will have a 2% overweight/underweight limit versus the screened indices.
HYPE comprises 429 bonds with an index yield of 7.45% and a duration of 2.98. Meanwhile, HYDP tracks 1,200 bonds with a yield of 8.36% and a duration of 3.53.
According to BlackRock, investors have shown an increased appetite for high yield following three months of outflows globally.
In November, high yield ETFs posted record inflows of $11.6bn with the €5.7bn iShares € High Yield Corp Bond UCITS ETF (IHYG) trading $828m on 15 November alone, BlackRock said.
“Asset owners across Europe are building portfolios with specific transition objectives, including Paris-aligned objectives. These investors are increasingly using bond ETFs as both strategic allocation tools and tactical instruments that can integrate with their portfolio transition objectives,” the group said.
“As the world shifts to new energy systems, it creates opportunities and risks for our clients. It's our job at BlackRock to seek optimal returns and outcomes for our clients in line with their investment choices while managing the risks as effectively as possible.”
In February 2022, Tabula became the first issuer in Europe to launch a high-yield PAB ETF. The Tabula EUR HY Bond Paris-Aligned Climate UCITS ETF (THEP) has amassed €56.3m assets under management since launch and is double the price of Blackrock’s new offering at 0.50%.
