By Simon Jessop

LONDON (Reuters), – BlackRock, an asset manager (NYSE:), said Tuesday that it created the biggest range climate-aligned exchange traded equity funds (EFT) following a tightening of rules for six existing funds with assets in excess of $9 billion.

Following consultations with BlackRock, the MSCI indexes that underpin BlackRock’s iShares ESG Enhanced UCITS ETF range will follow the European Union’s Climate Transition Benchmark, established to help cap global warming at 1.5 degrees Celsius (2.7°Fahrenheit) above pre-industrial norms.

CTB demands a 30% carbon intensity reduction – which is a measure that measures emissions to revenue – against the MSCI benchmark. Also, the benchmark must be decarbonized by 7% annually.

Scope 3 emissions, which cover emissions from the company’s products and not those generated by them, will now be available for the first time.

BlackRock also stated that tougher environmental filtering would be employed when choosing what ETFs to include. The oil sands exclusion will be extended to cover a wider range of unconventional oil- and gas activities.

Funds will not be available to any company that earns more than 5% from oil sands and shale oils, shale petrol, shale oil or coal-bed gas.

It said that a “environmental harm” screening will be used from November 2022 for companies who have been involved in serious or very severe disputes relating to environmental issues such as biodiversity and land use.

The Enhanced funds are not like BlackRock’s iShares MSCI Global Paris-Aligned Climate UCITS TF range. They will strive to achieve the same goals at portfolio level.

This means that the total number of stocks that can be included in any fund is twice as many than the Paris-Aligned funds (1,385 instead of 685).

These funds are more closely linked to the parent index’s risk-return ratio, which could make them attractive for wealth managers looking to increase their investment sustainability but not wanting to diverge from the parent’s returns.