BlackRock has launched the BFM Brown to Green Materials Fund, a UK-domiciled mutual fund tailored to meet UK investors’ demand for sustainable investment opportunities.
The fund focuses on “overlooked sectors beyond renewables” — companies in essential materials industries like metals, mining, cement, chemicals, steel, and construction, benefiting from decarbonising efforts. According to the provider, these companies will gain as they reduce sustainability risks, leading to higher valuations. Decarbonising firms are also expected to enjoy lower operational costs and capital requirements than their higher-carbon peers.
It is the “only UK-domiciled mutual fund to carry the Sustainability Improvers label under the UK’s Sustainable Fund Disclosure Regime (SDR)”, aimed at investing in assets with evidence-based potential to enhance environmental or social sustainability over time. The fund uses BlackRock’s SDR Improver assessment to ensure at least 70% of assets support its sustainability goals.
Evy Hambro, global head of thematic and sector investing at BlackRock, said: “We are targeting what we believe to be an overlooked segment of the value chain for lower carbon technologies. Companies which are high emitters today, but that have credible plans to decarbonise, could offer a significant investment opportunity. As the theme broadens out even further, these companies leading emissions intensity reduction efforts in their industries could benefit from a first-mover advantage as the low-carbon materials market develops.
This strategy has been designed to provide clients with exposure to the Brown to Green Materials theme, recognising that what could drive share prices from here, and what could make a positive difference to the world, is what happens moving forward rather than what’s already happened.”
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With a 0.92% ongoing charges fee for its D share class, the fund builds on the success of BlackRock’s BGF Brown to Green Materials Fund, launched in June 2023 for European investors, now managing ~$78 million. In its first year, 88% of the portfolio comprised companies progressing on decarbonisation goals, 76% targeted a 20%+ reduction in emissions intensity, and an average 6.4% emissions intensity reduction was achieved across holdings from 2022 to 2023.
Olivia Markham, managing director and portfolio manager at BlackRock, added: “Materials companies that best navigate the ‘brown to green’ transition could benefit from a re-rating in the valuation multiples the market is willing to pay for them. We expect global adoption of lower carbon technologies to drive stronger-than-expected demand growth for materials required faster than anticipated, and this will result in higher materials prices and better-than-expected earnings for producers.”
The fund is managed by Evy Hambro, Olivia Markham, and Hannah Johnson from BlackRock’s thematics and sectors team.
