Sustainable, Responsible &/or ESG Policy:

At every reconstitution, the Morningstar ESG Enhanced Index portfolios are created using an optimizer to minimize the objective and meet the constraints as follows:

• ESG Risk of the portfolio is minimized.
• No short positions are allowed.
• Ex-ante tracking error is below the target value. See table below for TE budgets.
• ESG Risk of the portfolio is less than or equal to the ESG Risk of the parent index.
• Carbon intensity of the portfolio is at least 30% lower relative to the parent index.
• The maximum weight of a security is restricted to the lesser of 3 times the security weight in the screened parent and the security weight in the screened parent plus 2%.
• The minimum weight of a security is restricted to the greater of half the security weight in the screened parent and the smallest security weight in the screened parent.
• The maximum one-way turnover is less than 10% in June and December reconstitutions and 5% in March and September reconstitutions.

Process:

At a product level the exclusions and revenues limits are below, any constituent that is within the ‘Parent’ Index that breaches any of these rules will be excluded from the product:

• UN Global Compact exclusion: All violators
• Controversial Weapons: All manufacturers and producers of anti-personnel landmines, clustermunitions, biological and chemical weapons, depleted uranium, white phosphorus
• Nuclear Weapons: All manufacturers and producers
• Adult Entertainment: 5% revenue production; 15% rev distribution
• Alcohol: 5% rev production; 15% aggregate rev equipment + products /services
• Civilian Firearms: All producers; 5% rev retail/distribution of Assault & Non-assault weapons
• Gambling: 5% rev operations; 15% aggregate rev retail + products/services
• Tobacco: All producers; 5% rev retail or products/services
• Thermal Coal mining: 5% revenue
• Thermal Coal power generation: 5% revenue
• Oil Sands Extraction: 5% revenue      

Resources, Affiliations & Corporate Strategies:

Sustainability at BlackRock

As a fiduciary, we invest on our clients’ behalf to help them meet their investment objectives. Our focus is on understanding and managing investment risk, anticipating our clients’ needs, and supporting them in achieving their long-term investment goals.

Our investment approach is informed by three principles:

• Client choice – we start by understanding clients’ investment objectives and offering a choice of products and strategies
• Performance – we seek the best risk-adjusted returns within the mandates clients give us
• Research – we underpin our work with research, data and analytics

We apply those same principles to sustainability and the low-carbon transition.

• Client choice. Our clients choose their investment objectives. They have a range of goals and preferences, and they look to BlackRock to meet their needs. We offer choices in investment products, portfolio construction, analytics, and stewardship (Voting Choice). This includes 500+ dedicated sustainable products and solutions across index and active investment platforms, with a combined US$ 665 billion in sustainable assets under management.

Source: BlackRock, as at 31 March 2023. Subject to change.

• Performance. We seek the best risk-adjusted returns within the mandates clients give us. As a fiduciary, we manage material risks and opportunities that could impact portfolios. Sustainability can be a driver of investment risks and opportunities, and we incorporate them in our firmwide processes when they are material. We evaluate the extent to which these risks are reflected in current market prices, so that we can identify investment opportunities for our clients. Without exception, our investment decisions are driven by a fiduciary duty to our clients to seek to deliver the best risk-adjusted returns for client portfolios, within the scope of the mandates they give us.
• Research. We underpin our work with research, data, and analytics. We research sustainability as we do any trend shaping the economy, markets, and asset prices. We assess how these trends could affect long-term economic value and how they could unfold over time. We research the transition to a low-carbon economy because we see it having implications on macroeconomic trends, company prospects, and portfolios.

Sustainability Strategy

The following documents lay out our strategy towards sustainability at BlackRock:

BlackRock’s approach to sustainability is rooted in our fiduciary duty to clients. We provide choice to our clients, we seek the best risk-adjusted returns, and we underpin our work with research, data, and analytics. As a fiduciary, we manage material risks and opportunities that could impact our clients’ portfolios, including those related to sustainability and the transition to a low-carbon economy. Please read more on our website here.

ESG Investment Statement: BlackRock’s role is to offer choice to help meet our clients’ objectives, transparency into how those choices could impact portfolios, and our research-based perspective on how structural trends could impact asset prices and investments over time. We continue to innovate for and with clients.  Our firmwide environmental, social and governance (ESG) integration statement details BlackRock’s approach to integrating ESG data or information into our firmwide processes, and outlines the foundation, ownership, and oversight mechanisms that underpin our approach. To read more, please visit our website here.

2022 Letter to CEOs : In 2022, we continue to advocate for stakeholder capitalism and sustainability as a part of our fiduciary duty. Our conviction at BlackRock is that companies perform better when they are deliberate about their role in society and act in the interests of their employees, customers, communities, and their shareholders. To augment this effort, we are launching a Center for Stakeholder Capitalism to explore the relationships between companies and their stakeholders. Our 2022 letter to CEOs can be found here.

2022 Letter to Clients: In 2022, we developed a new framework for how clients can invest in the transition to net zero leveraging data, analytics and engagement. We also announced our plan to build and deliver the industry’s most sophisticated transition tools, analytics, and portfolio advice. Our 2022 letter to clients can be found here.

2022 TCFD Report: BlackRock’s 2022 TCFD Report provides a comprehensive overview of our approach to managing climate risk.

2021 SASB Disclosure: Our firmwide Sustainable Accounting Standards Board disclosure for 2021.

Corporate Sustainability at BlackRock

BlackRock’s purpose is to help more and more people experience financial well-being.  In pursuit of our purpose, a focus on long-term sustainability is embedded across our business. BlackRock’s commitment to sustainability comes to life in the way BlackRock manages its business. The firm strives to lead by example in how it incorporates sustainability considerations into its business practices and disclosures, and the way it serves its employees, clients, shareholders, and communities.

BlackRock is committed to providing meaningful sustainability information to stakeholders. BlackRock also discloses information about its sustainability and environmental practices through the following:

• Corporate Sustainability Website
• Environmental Sustainability Website

In operating its business, BlackRock pursues an environmental sustainability strategy that is focused on reducing GHG emissions and increasing the efficiency and resiliency of its operations by utilizing low-carbon energy solutions such as renewable electricity to power our operations and using sustainable aviation fuel (“SAF”), where possible.

Underpinning BlackRock’s environmental strategy, the firm is working to achieve the following 2030 science-aligned emissions reduction goals (relative to a 2019 baseline): (i) 67% reduction of Scope 1 and 2 emissions by 2030; (ii) 40% reduction in Scope 3 business travel emissions by 2030; and (iii) engage suppliers representing 67% of the firm’s emissions (estimated based on spend) to set science-aligned goals by 2025.

BlackRock outlines its approach to managing organisational sustainability in its sustainability-related disclosures including its 2022 TCFD Report and its 2021 Sustainability Disclosure.

BlackRock also maintains a Supplier Code of Conduct & Ethics.

Please see more information about BlackRock’s sustainability strategy in the following reports:

• 2023 Proxy Statement
• 2022 Annual Report
• BlackRock’s Annual Letter to Clients

In terms of measuring our progress on ESG integration as a firm, BlackRock reports on elements of our firmwide and investment platform ESG Integration in our PRI report. More information on our PRI reporting is available at this link.

Standard ESG reporting templates are available for our public index and mutual funds detailing the sustainability characteristics of our portfolios such as exposure to thermal coal, MSCI implied temperature rise (ITR) and business involvement metrics. In addition, all active investment teams at BlackRock have articulated how they integrate ESG into their investment processes in their fund-level ESG investment statements, which are available on their website. Our broader investment platforms by asset class each have statements articulating how their investment processes integrate ESG, which are updated annually to reflect the latest practice.

BlackRock performs annual reporting on sustainable investing in line with regulatory expectations such as SFDR Article 3 requirements. Finally, we update our firm wide ESG Integration Statement annually to reflect our current state of practice and publish papers periodically on Sustainable Investing milestones that we achieve.

Social Impact

BlackRock believes companies have a responsibility to make a positive contribution to society, and our firm is no exception. Just as the firm has a fiduciary duty to ensure better financial futures for our clients, we have a social responsibility to help more and more people around the world experience financial well-being. Our Social Impact team works to address pressing social problems preventing low-to moderate income individuals from attaining financial security and prosperity. The team identifies, funds and partners with high-potential organizations to test and build evidence for innovative solutions with potential long-term impact, strong leadership and measurable outcomes. In addition to funding solutions to promote a more inclusive and sustainable economy, BlackRock’s Social Impact team supports and empowers BlackRock’s employees to give back to their communities in ways that are meaningful to them. The team is responsible for BlackRock’s community-based investments as well as humanitarian and disaster relief.

Through our Social Impact efforts, we are determined to help underserved communities attain financial well-being, and to build and advance inclusive and sustainable economies that work for all. In February 2020, the firm made a USD 550 million charitable contribution towards the philanthropic platform, establishing the BlackRock Foundation to augment our longstanding efforts to promote social and economic progress for more and more people around the world. Led by our Social Impact team, the Foundation and our existing Donor-Advised charitable fund support organizations that help people access jobs with higher earning potential and tools to build savings. The effort also looks for ways to advance environmental sustainability. The Social Impact team identifies and proposes corporate grants to an internal Social Impact board of senior executives, as well as to the BlackRock Foundation board.

In 2019, we made a USD 50 million philanthropic commitment to launch BlackRock’s Emergency Savings Initiative. The Initiative works with companies, non-profits and policymakers to expand solutions that allow people living on low- to moderate-incomes to establish a stronger financial safety net. Employers such as UPS, record keepers like Voya and payment platforms like MasterCard are all members of the Initiative and committed to launching emergency savings solutions.

Philanthropy is core to BlackRock’s ethos and culture. In 2022, our 24 employee-led BlackRock Gives committees located in offices around the world awarded 319 grants to non-profit organizations in their local communities. Several grants also provide our employees with volunteer opportunities. In addition, BlackRock has a robust matching gifts program that provides full-time employees with up to USD 10,000/year in dollar for dollar matched donations and volunteer time. Employees are also given two paid volunteer days per year to volunteer. Volunteer opportunities and employee-driven fundraisers are regularly posted on the firm’s matching gifts platform which is synced with our company intranet. In 2022, 50% of employees either matched their gifts or their time, collectively contributing $18.7 million, including matched contributions by BlackRock, to charities around the world.

In 2022 BlackRock deployed $59M in philanthropic capital globally. Our major commitments include:

• US$ 4,216,464.89 across 319 community non-profits in 31 countries through our Gives Grant program (2022)
• US$ 20 million to Breakthrough Energy Catalyst (part of a $100M grant pledge to Breakthrough Energy Catalyst in 2021 to invest in the development of clean energy technologies)
• US$ 3 million committed to Racial Equity organizations across the US and UK as part of the US$ 10 million commitment made in 2020 and committed in its entirety by the end of 2022.
• 69% of BlackRock employees participate in Social Impact programmes, including donations, hands-on and pro bono volunteerism and non-profit board service (2022)

For further information, please see our website.

All BlackRock sustainability-related affiliations

BlackRock is member of several industry associations, including those that are related to sustainability and the transition to a low-carbon economy, so that we can participate in dialogue with governments, companies, and financial institutions on matters important to many of our clients. By being part of these forums, we are able to represent clients’ interests and engage in conversations on their behalf. We have made it clear that we do not coordinate our votes or investment decisions with any external group or organization. BlackRock’s investment decisions are governed strictly by our fiduciary duty to clients. We do not make commitments to meet environmental standards that constrain our ability to invest our clients’ money on their behalf consistent with their objectives. Similarly, we do not make any commitment or pledge that would interfere with our independent determination on how to engage with issuers and vote proxies in the best long-term economic interest of our clients.

As an ordinary course of business, we review all of our external memberships on a periodic basis. We join and leave many working groups and initiatives based on their cadence. The list below reflects updated organizations and initiatives, as at 31 January 2023. Please note this list is not exhaustive.

Memberships:

Global

• Broad-based Initiatives
  • Ascend Foundation’s 5-Point Action Agenda (2021)
  • Business for Social Responsibility (BSR) (2020)
  • CECP’s Strategic Investor Initiative (2017)
  • CEO in Action (2017)
  • Chief Executives for Corporate Purpose (2021)
  • Global Impact Investing Network (GIIN) (2020)
  • IFC Operating Principles for Impact Management (2020)
  • Increasing Diversity in Innovation (2021)
  • SASB – Sustainability Accounting Standards Board (2011)
  • UN Principles for Responsible Investing (PRI) (2008)
  • UN Global Compact (2020)
  • 100 Women in Finance (2017)
• Environmental
  • CDP (formerly Carbon Disclosure Project) (2007)
  • Climate Action 100+ (2020)
  • Climate Bonds Initiative (2015)
  • Ellen MacArthur Foundation (2019)
  • Energy Transition Commission (2021)
  • Global Canopy (2021)
  • Green Bond Principles (2015)
  • GRESB (2011)
  • NZAM – Net Zero Asset Managers Initiative (2020)
  • One Planet Asset Managers Initiative (2019)
  • Partnership for Carbon Accounting Financials (2021)
  • Taskforce on Scaling Voluntary Carbon Markets (2020)
  • TCFD – Task Force on Climate-related Financial Disclosures (2017)
  • Terra Carta (2021)
  • Vatican Energy Transition and Care for Our Common Home (2019)
  • World Economic Forum’s Future of Energy Council (2016)
• Governance
  • FCLT Global (2013)
  • International Corporate Governance Network (ICGN) (2008)
  • International Integrated Reporting Council (2011)

Europe, Middle East and Africa

• Broad-based Initiatives
  • Abu Dhabi Sustainable Finance Declaration (2020)
  • Better Building Partnership (2020)
  • British Property Federation (2016)
  • Dutch Association of Investors for Sustainable Development (2018)
  • Dutch Fund and Asset Management Association – Sustainability Committee (2019)
  • ESG Ireland (2020)
  • Green + Gilt (2020)
  • Impact Investing Institute (2019)
  • LGBT Great (2020)
  • “Race at Work Charter” by Business in the Community (2020)
  • Spainsif (2020)
  • Swiss Sustainable Finance (2020)
• Environmental
  • Denmark's Sustainable Investments Forum (DANSIF)
  • Dutch Association of Investors for Sustainable Development (2018)
  • Dutch Fund and Asset Management Association: National Climate Agreement (2019)
  • German Sustainable Finance Council (2022)
  • Green and Sustainable Finance Cluster Germany (2021)
  • Institutional Investors Group on Climate Change (IIGCC) (2004)
  • Sustainable Investing Platform of DNB (2017)
  • Sweden’s Sustainable Investment Forum (SWESIF) (2021)
• Governance
  • Eumedion Corporate Governance Forum (2010)
  • Corporate Governance Forum (1992)
  • Pensions and Lifetime Savings Association Stewardship Disclosure Framework (2015)

Americas

• Broad-based Initiatives
  • Alliance for Inclusive and Multicultural Marketing (2020)
  • Hispanic Promise (2020)
  • Management Leadership for Tomorrow (MLT) (2020)
  • MAC Action Plan for Racial Equity (2021)
  • Open Letter from Leaders of the Partnership for New York City (2020)
• Environmental
  • American Clean Power Association (2016)
  • Ceres Investor Network on Climate Risk and Sustainability (2008)
  • Consejo Consultivo de Finanzas Verdes (2020)
  • Taskforce on Nature-related Financial Disclosures (2021)
• Governance
  • Broadridge Independent Steering Committee (1999)
  • Commonsense Principles of Corporate Governance (2016)
  • Council of Institutional Investors (2006)
  • Canadian Coalition for Good Governance (2005)
  • Investor Stewardship Group (2017)

Asia Pacific

• Broad-based Initiatives
  • Hong Kong Investment Fund Association (2007)
  • Japan Investment Advisers Association (1988)
  • Keidanren, Japan Business Federation (2010)
  • Responsible Investment Association Australasia (2011)
  • Taiwan Stock Exchange Stewardship Code (2020)
• Environmental
  • Investor Group on Climate Change Australia / New Zealand (2009)
• Governance
  • Asian Corporate Governance Association (2011)

Source: BlackRock, as at 31 January 2023. Subject to change.

ESG Integration – Index Strategies

BlackRock's index-tracking iShares ETFs are passively managed strategies which seek to replicate the performance of their Benchmark Indices as closely as possible and practicable. Therefore, asset allocation will be closely aligned to that of the Benchmark Index in question. However, ESG integration is addressed through:

• Engagement and collaboration with index providers on matters of index design and broader industry participation on ESG principles.
• Transparency, including reporting on sustainability-related characteristics of all strategies (ESG score, carbon intensity, and business involvement).
• Investment stewardship activities, which are undertaken across all investment strategies invested in corporate equity and debt issuers, to promote sound business practices in relation to the material environmental, social, and governance factors in the operations that are likely to impact operational excellence and long-term financial performance.

Further details on our Investment Stewardship capabilities are given below.

Investment Stewardship

As a fiduciary to our clients, our firm is built to enhance the value of our clients’ assets. From BlackRock’s perspective, sound management of business-relevant sustainability issues can contribute to a company’s sustainable long-term financial performance. Incorporating these considerations into the investment research, portfolio construction, and stewardship process can enhance long-term risk adjusted returns for our clients.

The Investment Stewardship team works with colleagues investing in public companies to analyse the material environmental, social, and governance (ESG) factors relevant to their investment decision-making. This responsible investment process varies according to both the investment mandate and the style of portfolio management. Where applicable, we consider any factor that in our judgment may affect the economic performance of companies over time, which includes the financial impact of non-financial factors.

These factors may include, board leadership, management quality in areas such as health and safety, employee relations, product liability and development, mitigation of risk (e.g., physical risks, reputational risk, regulatory risk and legal risks), and general responsiveness to societal expectations. These risks may come from a variety of sources such as climate change, social trends, consumer behaviour, or regulatory developments.

Understanding and evaluating material ESG risks will influence active investment decisions in strategies invested in listed equity and corporate credit, as well as our active strategies in real assets, including infrastructure and real estate.

In our index strategies, there is no option to manage ESG risks through the decision to invest, since fund objectives typically encompass tracking indexes by holding all constituents. In such equity strategies, we manage material ESG risks through our corporate engagement activity, including proxy voting.

Some question the impact that index-tracking investors can have given they cannot sell their holdings. However, it is precisely because we cannot sell that we are so committed to engagement. BlackRock can demonstrate a long-term commitment to the company, potentially well beyond the tenure of the current board and management and can be persistent in encouraging changes in practices that enhance financial sustainability.

Our investment stewardship efforts benefit from firm-wide data and insights on sustainability-related issues, and our investment teams benefit from the sustainability insights derived from our stewardship activities – a powerful, positive feedback loop.

Please see our website for further details of our proxy voting and engagement activities.

Index Funds replicating ESG benchmarks

For those Funds which replicate ESG Screened / Enhanced / Thematic / Impact / Sustainable Benchmark Indices, the screens in question are applied by the relevant index providers according to their own proprietary methodology.

For further information, please see www.ishares.com, in which a full list of these strategies can be found. Each Fund’s own product page will provide full disclosure of the index provider’s screening methodology within that Fund’s Prospectus.

Baseline Screens for New Sustainable Funds and ETFs

BlackRock’s Sustainable Investing (BSI) team has established a core set of baseline screens that are the starting point for new sustainable funds and ETFs. We also work with clients on specific screens that may or may not be aligned with BlackRock’s baseline screens and incorporate them into separate accounts that are managed for those clients.

When designing BlackRock’s ESG integrated index mutual funds and ETFs, we collaborate with index providers to find the optimal design to meet the requirements and objectives of the fund. We will also work with that provider to customise indices where a more bespoke solution is required over and above the benchmark methodologies which already exist.

MSCI Sustainability Ratings

We provide sustainability data on our website for all iShares funds, irrespective of whether they are in our sustainable range or not. Product pages display ESG scores, business involvement screens and carbon data. Scores and data are provided by MSCI ESG Research.

MSCI’s Sustainability and Business Involvement metrics are published and updated daily for all iShares index-tracking UCITS ETFs on each Fund’s product page at www.ishares.com.

Sustainability Characteristics can help investors integrate material sustainability considerations into their investment process. Within this, environmental, social, and governance (ESG) metrics can provide insight into a company’s management effectiveness and long-term financial prospects. Business Involvement metrics can help investors gain a more comprehensive view of specific activities to which a fund may be exposed through the investments it holds.

For further information regarding MSCI’s calculation methodology please see the following link.

In 2020, we extended this practice to all BlackRock index mutual funds and added these disclosures to help investors compare funds and choose the best investment option for their portfolio. We continue to work toward integrating our reporting capabilities so that all clients have access to consistent transparency and sustainability metrics across all vehicle types within our universe of index portfolios. On request, we can make this information available to clients in separate accounts, as well as accommodate specific client requests.

Dialshifter

Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by…

BlackRock pursues an environmental sustainability strategy that is focused on reducing GHG emissions and increasing the efficiency of BlackRock’s operations, where possible. During 2022, BlackRock made enhancements to the measurement of GHG emissions from its operations by onboarding Watershed, an enterprise climate platform, to improve carbon footprint accuracy, understand emissions drivers, and track the impact of emission reductions against BlackRock’s operational science-aligned emission reduction goals. To achieve these goals, BlackRock’s focus will continue to be on finding ways to leverage lower carbon energies like renewable electricity and sustainable aviation fuel and to increase energy efficiency in facilities and data centers.

SDR Labelling: Unlabelled with sustainable characteristics