BlackRock expands decarbonization efforts with new UK fund
BlackRock has launched the BFM Brown to Green Materials Fund in the UK, aligning with updated Sustainable Fund Disclosure rules (SDR). The fund, categorized under the “Sustainability Improvers” label, focuses on companies that play a crucial role in the low-carbon transition.
The materials sector-focused fund will be the first BlackRock launches under the United Kingdom’s “Sustainability Improvers” label. It targets investments in the materials sector, including metals, mining, cement, chemicals, steel, and construction materials—industries that are essential to decarbonization but often overlooked by investors.
Managed by BlackRock’s Global Head of Thematic and Sector Investing, Evy Hambro, alongside fund managers Olivia Markham and Hannah Johnson, the fund applies a proprietary methodology to ensure compliance with SDR standards. At least 70% of its assets must directly contribute to its decarbonization objectives. Currently valued at £16.1 million ($20 million), the UK-based fund follows the success of a similar European version launched in 2023, which now manages $78 million in assets.
BlackRock sees major investment opportunities in companies that are high emitters today but have credible plans to reduce their carbon footprint. The firm anticipates that first movers in emissions reduction will gain a competitive advantage as demand for low-carbon materials grows.
Fund managers expect these firms to benefit from rising material prices and stronger earnings as the global energy transition accelerates. Lower operational costs and capital efficiencies are also projected for companies prioritizing decarbonization.
This launch comes amid increasing regulatory scrutiny on ESG investments. The fund’s European counterpart adheres to the EU’s Sustainable Finance Disclosure Regulation, while the U.S. is preparing to implement the “Names Rule,” requiring funds to allocate 80% of assets in line with their stated objectives.
The regulation was included in a September 2023 update to the Securities and Exchange Commission’s Investment Company Act. The rule is scheduled to take effect for fiscal year 2026. Fund groups with over $1 billion in net assets have until December to comply — 24 months from the rule being published in the Federal Register — and groups with under $1 billion in net assets will have an additional six months.
