The BlackRock US Carbon Transition Readiness fund has raised $1.25 billion from institutional investors at launch. The new fund seeks to identify companies successfully transitioning to low-carbon standards. The launch’s magnitude emphasises the rapidly-growing demand for ESG products.

The fund began trading on 8 April, 2021, and surpassed the previous largest ETF listing, iShares ESG MSCI USA Leaders fund, which launched May 2019 and raised $850 million. The new fund’s sister fund, which invests in non-US companies, also launched on 8 April. The fund, too, accounted for one of the largest-ever ETF raises, with $475 million.

Both new ETFs function by assigning portfolio weightings reflecting a carbon transition readiness core to companies in the Russell 1000 and MSCI All World ex-US equity indexes. The carbon transition readiness score measures companies’ reliance on clean technology, waste and water management, energy production, and energy. A higher forecasted carbon reduction rate would mean a company would be overweight compared to its peers.

Larry Fink, BlackRock CEO, said: “Winners and losers will emerge in every sector and industry based on each company’s ability to adapt and pivot their strategies and business models. More and more capital is being allocated to sustainable strategies. These funds will enable investors to understand which companies are transitioning faster than others.”

Carbon transition ETFs from BlackRock and other asset managers are also being marketed as a way to achieve net-zero greenhouse gas emissions targets by 2050.