iShares ESG Aware 40/60 Moderate Allocation ETF (EAOM) seeks to track a moderate allocation strategy that maintains approximately 40% equity and 60% fixed-income exposure while applying environmental, social, and governance (ESG) screening criteria to exclude companies with poor sustainability practices.
How It Works
EAOM uses a fund-of-funds approach, investing in underlying iShares ETFs that provide ESG-screened equity and bond exposure. The fund maintains its target 40/60 allocation through periodic rebalancing, typically quarterly. The ESG screening process excludes companies involved in controversial weapons, tobacco, thermal coal, and those with severe ESG controversies. Holdings are passively managed and market-cap weighted within the underlying funds, providing broad diversification across thousands of securities.
Key Features
- Combines moderate risk allocation strategy with ESG screening, offering balanced growth potential while excluding controversial industries
- Fund-of-funds structure provides instant diversification across global equities and bonds through established iShares ETFs
- Launched in 2020 with 0.00% expense ratio, making it one of the lowest-cost ESG allocation ETFs available
Risks
- This ETF can lose value when both stock and bond markets decline simultaneously, as seen during rising interest rate periods when correlations increase
- ESG screening may exclude profitable companies and entire sectors, potentially limiting returns compared to non-ESG moderate allocation funds
- Bond allocation faces interest rate risk where rising rates cause bond values to fall, reducing overall portfolio value
Who Should Own This
Best suited as a core holding (30-60% of portfolio) for moderate-risk investors with 3-7 year time horizons seeking balanced growth with ESG considerations. Appropriate for investors wanting simplified asset allocation without managing separate stock and bond positions, particularly in tax-advantaged retirement accounts.