The Fund seeks to maintain certain ESG characteristics, exposure to weather risk and weather opportunities relative to the Bloomberg US Aggregate Bond Index (the “Benchmark”). Specifically, the Fund generally seeks to invest in fixed income instruments which, with respect to certain sectors, in the opinion of BlackRock, (i) have a better ESG rating than the ESG rating of those sectors within the Benchmark, (ii) have an overall rating of carbon emissions that is lower than that of those sectors within the benchmark, and (iii) as a whole, includes emitters who BlackRock, are better positioned to seize climate opportunities compared to benchmark issuers. The fund management performs these assessments based on BlackRock’s ESG research, which includes due diligence of the ESG risks and opportunities an issuer faces, as well as third party ESG ratings. These sectors and issuers may not constitute the majority of the Fund’s portfolio.
The Fund invests, under normal circumstances, at least 80% of its assets in bonds. For the purposes of this strategy, “bonds” include the following: bonds issued or guaranteed by the US government, its agencies or institutions; mortgage-backed securities issued or guaranteed by the United States government or its agencies or agencies, including mortgage debt obligations of United States agencies; commercial mortgage backed securities; mortgage securities to be announced (“TBA”); debt securities of US issuers, including corporate bonds and green bonds (which are bonds whose proceeds are used to finance qualifying projects with specific environmental benefits); municipal titles; asset backed securities; and US dollar-denominated debt securities registered in the United States of foreign issuers. The Fund may invest in bonds issued by companies located in countries other than the United States, including companies in emerging markets. These securities can have all types of payment and interest rate reset terms, including fixed rate, floating rate, floating rate, zero coupon, conditional, deferred, payment in kind and rate characteristics. adjudication. The Fund seeks to invest a substantial portion of its assets in bonds denominated in US dollars. The Fund may invest up to 10% of its assets in securities rated below “investment grade” (“high yield” or “junk” bonds). The Fund may invest in bonds of any maturity or duration.
The Fund may invest a significant portion of its assets in US agency mortgage debt securities, which are securities issued by entities such as the Government National Mortgage Association (“GNMA”) and the Federal National Mortgage Association which are backed by to mortgage pools. . Most transactions in pass-through mortgage securities are through standardized contracts for future delivery in which the exact mortgage-backed securities to be delivered are not specified until a few days before settlement. The Fund expects to enter into such contracts on a regular basis. When evaluating the Fund’s investments in the mortgage sector against the benchmark, the Fund currently considers GNMA securities to have a positive ESG assessment and currently considers most other types of asset-backed securities mortgages are ESG neutral. The Fund may also seek exposure to mortgage or government backed securities that finance societal opportunity projects or environmental development, among other ESG related issues.
The Fund may use derivatives, such as futures, options, swaps and various other instruments. The Fund may also invest in derivatives based on foreign currencies. In addition, the Fund may use derivatives and short selling to enhance returns as part of an overall investment strategy or to offset a potential decline in the value of other holdings (commonly referred to as a “hedge”). , although the Fund is not required to hedge and may choose not to.
Main risks of investing in the Fund
Risk is inherent in any investment. The value of your investment in the Fund, as well as the amount of return you receive on your investment, can fluctuate significantly from day to day and over time. You may lose some or all of your investment in the Fund or your investment may not perform as well as other similar investments. The following is a summary description of the main risks associated with an investment in the Fund. The relative importance of each risk factor below may change over time, and you should carefully consider each risk factor.
|■||Debt Securities Risk – Debt securities, such as bonds, involve, among other things, an interest rate risk, a credit risk, an extension risk and a prepayment risk.|
|Interest rate risk – The market value of bonds and other fixed income securities changes in response to changes in interest rates and other factors. Interest rate risk is the risk that the prices of bonds and other fixed income securities will rise when interest rates fall and fall when interest rates rise.|
|The Fund may be subject to increased risk of rising interest rates due to the current period of historically low interest rates. For example, if interest rates increase by 1%, assuming a current portfolio duration of ten years, and all other factors being equal, the value of the Fund’s investments should decrease by 10%. The magnitude of these fluctuations in the market price of bonds and other fixed income securities is generally greater for securities with longer maturities. Fluctuations in the market price of the Fund’s investments will not affect the interest income derived from instruments already held by the Fund, but will be reflected in the net asset value of the Fund. The Fund may lose money if short or long term interest rates rise sharply in a manner not anticipated by the management of the Fund.|
|To the extent that the Fund invests in debt securities that can be prepaid at the option of the obligor (such as mortgage-backed securities), the sensitivity of such securities to changes in interest rates may increase (to the detriment of mortgage-backed securities). of|