Exchange-traded funds built on environmental, social and governance themes have attracted record inflows this year, as the U.S. grapples with the pandemic, devastating weather and racial unrest. Inflows to ESG ETFs have surged to $22 billion so far in 2020, already about three times the 2019 total, according to data compiled by Bloomberg. Three BlackRock products dominate the ESG fund market and make up the majority of total assets. BlackRock’s iShares ESGU, iShares ESG Aware MSCI EM ETF (ESGE) and iShares ESG Aware MSCI EAFE ETF (ESGD) account for about $13.4 billion of year-to-date flows. BlackRock works with MSCI Inc. to set its funds’ inclusion and exclusion rules. MSCI, which scores ETFs based their holdings’ environmental, social, and governance risks and opportunities, rates ESGU and ESGD as AA, one level below the top ranking, while ESGE is rated A. The ESG category is inherently subjective, said Ben Johnson, Morningstar’s global director of ETF research. While investors may want to “tip their hat” to ESG, many don’t want to fall too far behind benchmark performances.

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