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Sustainable and transition investing

Sustainability is the new standard for investing. It is integral to the way we manage risk, generate alpha and build portfolios, in order to help investors achieve better risk-adjusted returns, and navigate the transition to a low-carbon economy.
  • iShares ETFs & BlackRock Funds cover a broad range of asset classes, risk profiles and investment outcomes. To understand the appropriateness of these Funds for your investment objective, please visit our product webpages.

    iShares ETFs & BlackRock Funds cover a broad range of asset classes, risk profiles and investment outcomes. To understand the appropriateness of these Funds for your investment objective, please visit our product webpages.

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What is sustainable investing?

Sustainable Investing is the practice of using ESG — environmental, social and governance — objectives, themes, and related considerations as a key driver for selecting investments. Combined with traditional financial analysis, this lens is an inclusive category that contains numerous approaches for pursuing better risk-adjusted returns.

What is ESG?

ESG refers to specific considerations that can be used as part of investment decision-making:

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Environmental (E)
Carbon emissions, waste and recycling and supply chain management
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Social (S)
Diversity issues, health and safety and human rights
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Governance (G)
Board structure/ size, transparency, and ownership structure

Climate risk is an investment risk

Environmental investment considerations — specifically climate change — are a growing force shaping companies’ long-term prospects. We look at climate risk through two categories:
Physical climate-related risks
The human and environmental threats posted by climate change, such as changes in the average temperature and weather patterns
Risks related to the transition to a low-carbon economy
The wholesale transformation of entire sectors. Transitioning to a low-carbon economy will requires changes as profound as the rise of Emerging Markets and Digitization.

What is transition investing?

Transition investing is the practice of repositioning of investment portfolios to account for potential risks and opportunities associated with the transition to a low-carbon economy, and/or the physical impacts of climate change.

The transition to a low-carbon economy refers to efforts to systematically reduce carbon dioxide emissions and concentrations. Of all greenhouse gases, and has a long lifetime in the atmosphere — it takes hundreds or even thousands of years to be naturally absorbed.1

Transition to a low-carbon economy represents a historic investment opportunity

The transition is underway, powered by three forces:

  1. Technology
  2. Societal preferences
  3. Policy

The transition will accelerate. Markets consistently underestimate disruption, including the virtuous cycle across these three forces.

The transition is not fully priced, creating an investment opportunity today

Our bottom line: investors cannot ignore the transition

Decarbonization is re-wiring the real economy in and across the globe. APAC creates around 45% of the world’s greenhouse gas (GHG) emissions with China, India, Indonesia, Japan and South Korea among the top polluters globally.2

BlackRock is focused on helping clients manage the risks and capture the opportunities associated with the transition by offering a holistic platform of investment solutions and data analytics.

Sustainable investing terms

See a breakdown of the key sustainable investing terminology:

  • The practice of integrating ESG considerations into investment decision-making, alongside traditional investment processes, with the aim of managing risk, finding opportunities, and achieving better long-term returns.

  • Greenhouse gases in the atmosphere trap solar radiation and make the planet warm enough to support life. The “greenhouse effect” refers to the absorption of heat emitted by the Earth that otherwise would pass outward from the Earth’s surface into space.

  • Engagement with public companies to promote corporate governance practices that are consistent with encouraging long-term value creation for shareholders. Engagement and voting provide shareholders an opportunity to express their views.

  • The goal of reducing human-caused greenhouse gas emissions to the greatest extent possible and balancing out remaining emissions by removing carbon dioxide from the atmosphere (e.g., by restoring forests or deploying carbon capture and storage technology).

  • A legally binding international treaty on climate change, adopted at the 2015 United Nations Framework Convention on Climate Change conference in Paris.

  • Increased risk to companies’ assets and activities caused by the direct impact of changing weather patterns and natural catastrophes.

  • Impact that the transition to a low-carbon economy may have on a company’s long-term profitability.

Navigate sustainable investing with BlackRock

We are committed to helping our clients along their sustainable journey. We have a comprehensive sustainable investment platform — offering index, alpha and private market solutions across active asset classes — to provide ease of access and choice for every kind of investment portfolio.
Client-first mindset
Our work on sustainability is rooted in our fiduciary duty as an asset manager to invest on behalf of our clients to help improve their investment outcomes for the long term.
Flexibility & choice
Our comprehensive range of solutions span asset classes, geographies, and investment styles to address a variety of sustainable and financial goals.
Low-carbon transition
We are committed to helping clients navigate the transition to the low-carbon economy, offering options based on their objectives.

Sustainability is BlackRock’s standard for investing

In 2020, we said that climate risk is investment risk and that, along with risks, the transition presents a historic investment opportunity. We also believe companies with favourable ESG characteristics are likely to be better positioned to manage climate risks and to benefit from opportunities brought about by the transition to a low-carbon economy.

Companies, investors and governments must prepare for a significant reallocation of capital. BlackRock’s sustainability strategy focuses on two structural themes driving this change: transition finance and stakeholder capitalism - the idea that putting a company’s purpose at the heart of relationships with stakeholders is critical to long-term success.

How is sustainability measured?

Across Asia, environmental and social disclosures by corporates is accelerating, demonstrated by the number of companies based outside the US now using Sustainability Accounting Standards Board (SASB) standards; Asia now accounts for 10.5% of reporting companies.3

With increased disclosure comes better-quality ESG data, which can be used to inform investment decisions.4

Understanding sustainability metrics

To help investors to integrate non-financial, sustainability considerations into investment processes, we disclose sustainability characteristics for all our funds where available. These metrics enable investors to evaluate funds based on their ESG risks and opportunities, and can provide insight into the effective management and long-term financial prospects of a fund.

Investors can find and compare seven consistent MSCI sustainability metrics across our funds, including:

  • A direct mapping of ESG Quality Scores to letter rating categories (e.g. AAA = 8.6-10). The ESG Ratings range from leader (AAA, AA), average (A, BBB, BB) to laggard (B, CCC).

  • The MSCI ESG Quality Score (0 - 10) for funds is calculated using the weighted average of the ESG scores of fund holdings. MSCI rates underlying holdings according to their exposure to industry specific ESG risks and their ability to manage those risks relative to peers.

  • A fund's exposure to carbon intensive companies. This figure represents the estimated greenhouse gas emissions per US$1 million in sales across the fund’s holdings. This allows for comparisons between funds of different sizes.

To explore the sustainability characteristics of specific funds, visit the product pages of


Below you will find highlights and key takeaways of our conversations at the BlackRock Sustainability Series. We hope you find these insights helpful in increasing your understanding of climate risk and the changes that will follow as the world transitions to a net zero path.

Meet the BlackRock Sustainable and Transition Solutions team

The Sustainable and Transition Solutions team provide our firm and our clients with a clear picture of the relationship between sustainability issues, risk and long-term financial performance.

The team drives the firm-wide development and adoption of sustainable investment practices, analytics, and products in line with our public sustainability commitments and fiduciary duty.

APAC leadership

Emily Woodland
Head of Sustainable and Transition Solutions, APAC
Yutaka Naito
Head of Sustainable and Transition Solutions, Japan
Steve Monnier
Head of Sustainable and Transition Solutions, Australasia