BlackRock tried again, this time with a new name. That December, with “ESG” a fresh buzzword, the fund was renamed the BlackRock Advantage ESG US Equity Fund. A month later, Fink declared the world was on the cusp of a “fundamental reshaping of finance” because of climate change.
“As industry definitions evolved, we proactively renamed the fund in 2019 to reflect the portfolio management style and environmental, social and governance strategy being used,” BlackRock said in its statement to Bloomberg.
BlackRock Advantage ESG US Equity Fund cast aside its predecessor’s stated strategy of investing in companies with positive impacts on society. Instead, it said it would screen out companies with exposure to controversial weapons, tobacco and fossil fuels, beyond certain thresholds. Portfolio managers then would incorporate ESG insights into their stock picks.
After the switch, money flowed in—$9.8 million in January 2020, $18.4 million a month later, and $13 million in March, according to Morningstar. By the end of November 2021, the fund had taken in a net $510.5 million.
But while the ESG industry boomed along with the rest of Wall Street, Washington began taking a closer look at fund-naming practices—and asking questions about revamping the “Names Rule,” which dates to 2001.
BlackRock executives conceded that industry practices should be clearer. But they and other industry officials urged the SEC to avoid “prescriptive definitions” for terms like ESG.
The argument: “ESG,” to Wall Street’s thinking, describes a broad investment strategy, rather than a specific type of investment.
When BlackRock changed the fund’s name a second time to BlackRock Sustainable Advantage Large Cap Core Fund, effective last December, it said the switch was part of a larger push to offer clients more actively managed products that incorporate ESG criteria and sustainability.
In an October letter about BlackRock’s broad plans, lawyers for the funds told SEC staff that the “sustainable” in its fund names didn’t suggest a focus on any particular type of investment, industry, country, geographic area or tax status.
The newly renamed fund also recast its mission, telling investors that it would pick companies better positioned to capture “climate opportunities” relative to those in a broad benchmark.
It also refined its criteria for investing in environmentally destructive industries like thermal coal and oil sands extraction. In the first quarter, the fund bought Exxon and Halliburton, as well as several other fossil-fuel companies including Marathon Oil Corp. and Devon Energy Corp., according to data compiled by Bloomberg.
For BlackRock, the Sustainable Advantage Large Cap Core Fund today looks like a success. Seven years and three names in, it ranks among the largest of the company’s actively managed sustainable-branded US equity mutual funds, with more than $650 million of assets.
This article was provided by Bloomberg News.