Looking to expand its footprint in the still small field of socially responsible exchange-traded funds, BlackRock's iShares unit in March filed for what looks to be the first human rights-focused ETF.

The iShares Human Rights Index Fund would join just four other broadly diversified ETFs that use environmental, social and governance (ESG) screens to pick investments. That list includes BlackRock's own iShares KLD 400 Social Index (DSI) and iShares MSCI USA ESG Select Index (KLD). Both funds have reeled in respectable assets flows, with recent amounts of $173.9 million for DSI and $190.7 million for KLD.

But the two other broad-based SRI ETFs--both offered by Pax World--remain tiny. The Pax MSCI North America ESG Index ETF (NASI) had recent assets of $10.4 million and the Pax MSCI EAFE ESG Index ETF(EAPS) had $8.2 million.

While an ETF focused on human rights issues has raised questions about how much value the screens offer, iShares is looking to capitalize on the continuing popularity of SRI investing. Assets in socially responsible mutual funds rose 25% to $69.8 billion on March 30, just shy of the record $70 billion in assets in April 2011, according to Morningstar.

"The iShares Human Rights ETF reflects a growing desire by investors to align their investments with their values," says Joe Keefe, president and CEO of PaxWorld Management in Portsmouth, N.H. "We think a lot of new ESG ETFs are coming down the road."  

The iShares Human Rights Index Fund takes a different approach to the category of SRI funds.  The underlying index aims to exclude companies that provide material support for controversial regimes or governments that are subject to widespread sanctions based on human rights violations. At this time, governments in three countries-Sudan, Iran and Burma-meet those standards, according to MSCI, which created the index for BlackRock in November 2011.

"Material support" includes significant involvement with these governments' security forces or strategic industries such as energy and mining. Companies may also be excluded for actions taken by their own employees, private military forces or civilian contractors.

The selection universe for the human rights index is the MSCI All Country World Index (ACWI), which comprises large- and mid-cap companies in developed and emerging markets. As of March 30, there were 2,430 equity securities in the MSCI ACWI. Based on the human rights criteria developed by MSCI, between 50 and 60 stocks generally are eliminated from the index, according to Thomas Kuh, executive director at MSCI. The index will be reconstituted quarterly at the end of January, April, July and October.  

Among the companies excluded in the latest iteration of the index are PetroChina, whose parent company, China National Petroleum Corp., provides extensive support to the oil, natural gas and refining industries in Sudan; Hyundai Heavy Industries of South Korea, which provides oil tankers and equipment for oil refining operations to the government of Iran; and Barrick Gold, whose security forces have been accused of human rights violations at mining operations in Papua New Guinea and Tanzania, according to MSCI.

As is common in SRI portfolios that use environmental, social and governance screens, many of the companies on the excluded list operate in the energy and materials sectors of the economy. For example, the iShares KLD 400 Social Index fund, which is based on the MSCI KLD 400 Social Index, has positions in basic materials, energy and utilities that are half the weight found in the S&P 500, while its technology and healthcare positions are at a third or more than the S&P 500.