Best Fixed Income ESG Fund – BlackRock ESG Emerging Markets Debt Funds

Channels: Green Bonds

Companies: BlackRock, JPMorgan

People: Giulia Pellegrini

Giulia PellegriniBlackRock's ESG Emerging Markets Debt (EMD) Funds are a new product range designed to provide investors with access to all segments of emerging market debt, while incorporating ESG screens.

The aim is to do this without significantly sacrificing the yield, diversification and alpha generation potential provided by the emerging market asset class.

The series comprises: the BGF ESG Emerging Markets Bond Fund, the BGF ESG Emerging Markets Local Currency Bond Fund, the BGF ESG Emerging Markets Corporate Bond Fund and the BGF ESG Emerging Markets Blended Bond Fund.

The funds invest in a selected portfolio of US dollar-denominated debt securities issued by governments and corporate issuers, local currency debt issued by governments and emerging market currencies.

Their aim is to outperform a set of ESG benchmarks for emerging markets that were created in Spring 2018 in partnership with JPMorgan (JESG EMD Indexes). The partners hope these benchmarks will be widely adopted by the industry, and thus encourage the flow of capital towards issuers in emerging markets with stronger ESG credentials.

ESG criteria are incorporated into the funds at both a passive level (through the use of the ESG benchmarks) and at an active level (in the research process).

"The gap between ESG leaders and laggards is large in the EM world," said Giulia Pellegrini, head of BlackRock's EMD sustainable investing team, which oversees more than $27 billion of investments. "Strong ESG data can provide forward-looking information that captures the underlying deterioration of an issuer's creditworthiness, sometimes well before standard macro credit metrics. These funds harness our proprietary ESG scoring and other analytical tools to help build ESG-focused investment themes that take advantage of additional alpha-generating opportunities in the EMD space."

Judges praised the funds for "looking to move capital flows, engagement and ESG integration."