BlackRock Charities UK Equity ESG Fund

overall rating:

0.3

planets

Alex Powell
3/22/2022
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The BlackRock Charities UK Equity ESG Fund aims to marry long term growth with sustainable insight and consideration, although it unfortunately falls short of the latter of these ambitions. The fund’s holdings are simply not representative of these principles, no matter how much corporate rhetoric backs up their selection. Choices such as Shell, Rio Tinto and even BlackRock’s own ‘Growth and Recovery Fund’ should not, in my opinion, be three of the top four holdings in a sustainable fund. There is some transparency, and in certain ways, information is offered more readily than by many other financial service providers. However - this is not to fully commend BlackRock, as there are still areas of improvement to be made, such as a clearer message on their ESG process, and exactly the prerogative of their portfolio managers to go beyond it. Overall, this fund does not live up to its name. 

What it's made of:

0

The top ten holdings are below - Name, Percentage, ESG :

1) BlackRock Growth and Recovery Fund, 8.28%, ⅖ stars on Morningstar, 2) AstraZeneca, 7.60%, 23.2, 3) Rio Tinto, 7.11%, 32.1, 4) Shell, 5.77%, 35.1, 5) Relx, 5.44%, 5.4, 6) Reckitt Benckiser Group, 4.67%, 22.9, 7) Prudential, 3.15%, 15.7, 8) Standard Chartered, 3.11%, 28.2, 9) 3i Group, 3.11%, 11.6, 10) Ferguson, 2.88%, 15.4

This portfolio of top ten holdings, if I am being truly honest, make a mockery of the principle of sustainable investment. The inclusion of both Rio Tinto and Shell in the top four holdings, with a combined weight of over 12.5%, make it incredibly hard to consider this fund as one that focuses on ESG in any way, shape, or form. Furthermore, the largest holding is one of BlackRock’s own funds, which is a clever way of reducing transparency to the consumers. The fund in question, the ‘Growth and Recovery Fund’, is not reviewed well by Morningstar in terms of its sustainability, with only two out of a possible five stars awarded. It is also described as not a sustainable fund - I wonder how BlackRock have come to the conclusion that having their top holding be a product they themselves describe as unsustainable makes this fund ‘ESG’ at all? Moving down the top ten, there are some better choices, although it should be noted none of these firms are actively trying to address sustainability, but merely examples of corporate firms who have somewhat reasonable practices - this is undoubtedly disappointing to see. 

 

How it's made:

0.5

The investment approach outlined on BlackRock’s own website is extremely vague, with at the very top, only positive returns prioritised as fundamental to the behaviour of the fund. This perhaps explains the reprehensible inclusion of Shell as the fourth largest holding in the fund. On the fact sheet for January 2022, the only reference to sustainability comes in referring to adhesion to the ‘Sub-Fund’s ESG Policy’, the exact nature of which is hard to find. In a similar vein, the ‘ESG Integration’ section of the fund’s information page contains the exact same wording as that of the Growth and Recovery Fund they also provide, one we have already noted as being neither sustainable, nor really attempting to be. Thus it is almost impossible for the consumer to know why certain shares are being bought, as there is a noted lack of transparency in the processes undertaken by BlackRock. They do exclude Tobacco, Defense, Aerospace, Beverages and Investment Trusts from their portfolio, and it is really refreshing to see Aerospace as an excluded sector - this is not always the case and should absolutely be picked up by other financial institutions. Overall, while the fund’s methodology is somewhat shrouded, the principles are there to create a fund that could do some good for the world - however, as we have seen above, this has not come to fruition. Perhaps therefore, the portfolio managers have been allowed too much freedom, because I fail to see a world in which adherence to the ‘Sub-Fund’s ESG Policy’, results in some of the inclusions above - something has to change. 

 

Who makes it:

0.3

BlackRock themselves are the world's largest (by assets under management) financial services provider - therefore they have an extremely important role to play in the future of our planet. Their own ESG score is 20.7, representing a very average commitment to sustainability, although this has come down two points in the last year, perhaps testament to a greater focus on sustainability. One of BlackRock’s key issues has been their poor proxy voting, which Morningstar identifies as a particular weakness of their sustainability program. Furthermore, they have extremely high (although decreasing) exposure to fossil fuels for a financial institution. Thankfully, we do at least know who the fund managers are, Adam Avigdori and David Goldman. Adam has been at BlackRock for 20 years, although only moved into the sustainable investment world in the last year, so may have less experience in this world - on the other hand it is harder to find information on David, who does not seem to have any ESG experience. It seems eminently preferable to me to have a combined team working on all ESG funds - with a combination of financial professionals and those trained outside the world of finance who can offer crucial insights into sustainability - it is a pity this is not the case here. 

Sources:

https://www.blackrock.com/uk

https://www.sustainalytics.com

https://www.ft.com

https://www.morningstar.co.uk/uk/