BlackRock’s ESG Overhaul: 135 Funds Renamed to Align with New European Regulations
Key Highlights
- BlackRock Inc. (BLK), the world’s largest asset manager, is renaming or changing the methodology of 135 ETFs and funds in response to the European Securities and Markets Authority (ESMA) fund-naming guidelines.
- The update affects $185 billion in assets under management (AUM) across its light green, middling green, and dark green fund categories.
- ESG terminology is being removed from 51 strategies with $51 billion in AUM, while Paris Aligned Benchmark (PAB) exclusions will be applied to 60 “dark green” strategies.
- The renaming follows client feedback and ESMA’s May 21 regulation requiring stricter criteria for funds using ESG and sustainability-related terms.
BlackRock’s ESG Strategy Update
In a significant move, BlackRock Inc. (NYSE: BLK) is renaming or adjusting the methodology of 135 exchange-traded funds (ETFs) and investment products. This decision comes as the firm aims to comply with ESMA’s new fund-naming regulations, which enforce stricter guidelines for funds using ESG and sustainability-related labels.
BlackRock’s adjustments span across three fund categories:
- Light Green Funds: 51 strategies ($51 billion AUM) will have the “ESG” moniker removed from their names.
- Middling Green Funds: 18 strategies ($42 billion AUM) will shift towards climate transition objectives.
- Dark Green Funds: 60 strategies ($92 billion AUM) will adopt Paris Aligned Benchmark (PAB) exclusions.
The changes reflect client preferences and regulatory requirements, aiming to enhance transparency and ensure compliance with Sustainable Finance Disclosure Regulation (SFDR) classifications.
Light Green Funds: Removal of ESG Labels
As part of the overhaul, BlackRock is removing ESG branding from its iShares MSCI ESG Screened UCITS ETF range and the BSF Systematic ESG World Equity Fund. This affects 51 strategies managing $51 billion in AUM.
These products will remain classified as Article 8 under SFDR, meaning they promote environmental or social characteristics but do not have sustainable investment as their core objective. The decision to remove ESG labels rather than alter the underlying investment strategies was driven by client feedback, highlighting a preference for retaining consistent methodologies with simplified naming conventions.
Middling Green Funds: Climate Transition Alignment
For its middling green fund range, BlackRock is shifting 18 strategies managing $42 billion in AUM towards clearer climate transition objectives.
Key changes include:
- Climate Transition Benchmark (CTB) labeling for the MSCI ESG enhanced ETF range.
- Updated disclosure language for the BGF European Equity Transition Fund.
The move aims to align the fund range with climate-related benchmarks, ensuring compliance with ESMA’s enhanced sustainability disclosure requirements.
Dark Green Funds: Paris Aligned Benchmark (PAB) Exclusions
In BlackRock’s dark green fund suite, which includes 60 strategies managing $92 billion in AUM, the company will begin implementing Paris Aligned Benchmark (PAB) exclusions.
Key products affected include:
- BGF ESG Multi-Asset Fund.
- iShares MSCI SRI UCITS ETF range.
The adoption of PAB criteria signals a stronger alignment with EU climate objectives, enhancing the credibility and sustainability of these strategies.
Unchanged Funds: PAB Suite Exemptions
Notably, 17 funds in BlackRock’s sustainable range, including the PAB suite managing $5 billion, will remain unchanged. These funds already align with ESMA-compliant sustainability standards and do not require renaming or rebranding.
Industry-Wide Impact of ESMA’s New Rules
BlackRock’s rebranding comes as part of a broader trend in the European fund industry. Many asset managers are adjusting their fund names or methodologies ahead of ESMA’s May 21, 2025, enforcement date.
According to MSCI, by February 2025, the number of sustainability-labeled funds had already dropped by 20% due to stricter naming criteria. Research by ISS STOXX indicates that 84% of Europe’s sustainable fund roster is impacted by the ESMA guidelines.
The widespread rebranding signals increased scrutiny and transparency in ESG labeling, aiming to prevent greenwashing and ensure that fund names accurately reflect their investment strategies.
Client-Centric Approach and Future Implications
BlackRock stated that its renaming decisions were heavily influenced by client consultations. The firm engaged with a range of stakeholders, including:
- Large distributors.
- Product selectors.
- Portfolio managers.
The feedback revealed a clear preference for consistent investment methodologies with more accurate and transparent fund names.
Moving forward, BlackRock’s decision to rebrand rather than alter methodologies highlights its commitment to investor transparency while maintaining its sustainability-focused investment principles.
Conclusion
BlackRock’s decision to rename 135 ETFs and funds reflects the growing pressure on asset managers to align with ESMA’s stricter fund-naming regulations. By removing ESG labels from certain products while enhancing climate-focused criteria for others, BlackRock aims to balance client preferences with regulatory compliance.
As the May 21 deadline approaches, more asset managers are expected to follow suit, marking a significant shift in how ESG investment products are marketed and disclosed across Europe.
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