AlternativesMarch 17, 2020

BlackRock Converts Money Market Portfolio to Environmental Fund

Fund will invest 80% in securities that meet its environmental criteria and contribute to the World Wildlife Fund.

Reported by Michael Katz

BlackRock is converting its BlackRock Money Market Portfolio to the BlackRock Wealth Liquid Environmentally Aware Fund (WeLEAF), which the firm says is the first environmentally aware money market product dedicated for the US wealth market.

“Client interest in our LEAF series has revealed tremendous demand for sustainable liquidity management,” Thomas Callahan, BlackRock’s head of global cash management, said in statement. “WeLEAF was designed to answer the call of our private wealth distribution partners, who are seeking a money market fund product that appeals to the growing segment of their clients that care deeply about sustainability and climate risk.”

WeLEAF will seek to invest at least 80% of the value of its net assets in securities whose issuer or guarantor meets the fund’s environmental criteria. Under the fund’s investment policies, an issuer or guarantor may meet such criteria if it, at the time of the fund’s investment, it has a better-than-average performance in environmental practices.

According to the fund’s prospectus, when evaluating performance in environmental practices, BlackRock will use data or other environmental, social, or governance (ESG) risk metrics including ratings provided by independent research vendors in determining whether to invest in a security. The research vendors may consider one or more of the following factors: issuer or industry exposure to environmentally intensive activities, disclosures by an issuer around climate related issues and environmental matters, or specific targets or plans by an issuer to manage environmental exposures.

The fund will not invest in securities issued or guaranteed by entities that derive more than 5% of their revenue from fossil fuels mining, exploration, or refinement, or that derive more than 5% of their revenue from thermal coal or nuclear energy-based power generation. It may also invest in “green bonds,” whose proceeds will be used to finance projects intended to generate what BlackRock deems is an environmental benefit.

However, the fund may also invest up to 20% of the value of its net assets in securities whose issuer and guarantor have a below average performance in environmental practices, are not evaluated by any independent research vendor, and do not otherwise meet the fund’s environmental criteria.

BlackRock said it will use at least 5% of its net revenue from management fees it earns through the fund to purchase and retire carbon credits either directly or through a third-party organization. The purchase of carbon credits will be made at least annually, with BlackRock maintaining the option to increase, decrease, or terminate these purchases in its sole discretion at any time.

The firm also has a licensing agreement with the World Wildlife Fund (WWF) in which it will contribute annually to the environmental nonprofit group to help further its global conservation efforts.

In January, BlackRock said it is making sustainability the central focus of its investment strategy for the $6.3 trillion it manages for clients. In his annual letter to CEOs, and another to clients, BlackRock CEO and founder Larry Fink announced several initiatives to make sustainability integral to the firm’s portfolio construction and risk management.

“Sustainability- and climate-integrated portfolios can provide better risk-adjusted returns to investors,” Fink said. “And with the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward.”