BlackRock has switched the indices of euro and US dollar high yield corporate bond ETFs in favour of softer ESG credentials to suit the updated sustainability targets of a Nordic pension fund.

The $582m iShares € High Yield Corp Bond ESG Paris-Aligned Climate UCITS ETF (HYPE) and the $423m iShares $ High Yield Corp Bond ESG Paris-Aligned Climate UCITS ETF (HYDP) will switch from tracking their respective versions of the Bloomberg MSCI Corporate High Yield Climate Paris-Aligned ESG Select index to their respective MSCI HY Corporate Bond Select indices.

As a result of the changes, HYPE and HYDP will no longer be classified as Paris-Aligned Benchmark (PAB) products but will continue to be classified as Article 8 under the Sustainable Finance Disclosure Regulation (SFDR).

The new methodology removes restrictions on tobacco, civilian firearms, conventional weapons and certain fossil fuels.

The change is due to take effect on 30 October.

“The proposed benchmarks provide an appropriate long-term solution for these funds while maintaining their core high yield investment exposure and sustainability-related characteristics,” a spokesperson from BlackRock said.

The move follows BlackRock recently switching €13bn of ETFs from optimised sampling to full physical replication last month on the back of sky-high technology valuations pushing single-stock weightings up against UCITS concentration limits.

Other recent tweaks to BlackRock’s ESG lineup came when it tightened the sustainability screen of a $2bn ESG bond ETF by removing a loophole that previously allowed limited exposure to companies involved in fossil fuel-related activities.

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