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Towards a more sustainable future

We believe sustainability is the new standard for investing. We are committed to making sustainability integral to the way we manage risk, generate alpha and build portfolios - to help investors achieve better long-term, risk-adjusted returns. Learn more about sustainability and how it influences risk and return here.

What is sustainable investing?

Sustainable investing is about investing in progress and recognising that companies solving the world’s biggest challenges may be best positioned to grow. It is about pioneering better ways of doing business, and creating the momentum to encourage more and more people to opt in to the future we’re working to create.

We view sustainable investing as the combination of traditional investment approaches with environmental, social and governance (ESG) insights to mitigate risk and enhance long-term return.

What is ESG?

ESG is often conflated or used interchangeably with the term “sustainable investing”. We see sustainable investing as the umbrella and ESG as a data toolkit for identifying and informing our solutions.

ESG data is most often categorized as “non-accounting” information because it captures components important for valuations that are not traditionally reported. The valuation of companies has become more complex, with a growing portion tied up in intangible assets. ESG metrics provide insights into these intangibles, such as brand value and reputation, by measuring decisions taken by company management that affect operational efficiency and future strategic directions.

BlackRock Icon Globe
Environmental (E)
Covers themes such as climate risks, natural resources scarcity, pollution and waste, and environmental opportunities
BlackRock Icon Diversification
Social (S)
Includes labour issues and product liability, risks such as data security, and stakeholder opposition
Risk Icon
Governance (G)
Encompasses items relating to corporate governance and behaviour such as board quality and effectiveness

Hi, my name is Steve Monnier and I'm the Client Sustainability Specialist here at BlackRock Australia. If it feels like the future is running at us, you're probably right. Market sentiment, policy reform, structural changes are transforming the investment landscape at an incredible pace. Our clients within this backdrop are setting more ambitious sustainability goals. They're setting goals to be carbon neutral by 2050. They're calling for greater levels of female participation in leadership roles. And they're also aligning their investments to solve global, environmental and social problems in addition to providing investment returns. In this environment, helping our clients achieve their sustainability and investment goals has never been more important. There are a lot of terms and acronyms in this space, from ethical investing, to responsible investing, or even sustainable investing. And often these terms are used interchangeably and they do mean different things to different people. So this is actually a great place to start. At BlackRock we define sustainable investing as combining the best of traditional investments with insights from society. These are traditionally non-financial insights and we bring this together to generate the best long-term outcomes for our clients. We believe that sustainability related issues can have real quantifiable impacts. So for us, sustainable investing is first about our fiduciary duty to clients. It's about finding ways to integrate sustainability in a way that's consistent with generating long-term financial performance. Secondly, it's about enhancing the way that we invest. It's about improving on traditional investment approaches to incorporate new data, new insights, in a way that drives our understanding of how we can measure and integrate sustainability related issues into being better long-term investors and providing better long-term outcomes for our clients. As we think about how to invest sustainably, we really want to approach it from the perspective of our clients, and they typically come to this from two impulses either to avoid or to advance. And that's really helped inform us with our thinking around developing a sustainable framework here at BlackRock. The first impulse to avoid is typically associated with avoiding exposure to certain companies, certain sectors, such as tobacco or weapons. And the other impulse that we see clients express is to align their capital with positive behaviours, positive outcomes. And increasingly what we see is clients think not just about how they can avoid exposures but also how they can advance their exposures. One of the common misconceptions I hear about sustainable investing is that it's about values. Now that really only tells you half the story. A part of our role is to help our clients reflect their values in their portfolios. But the other part is about adding value. It's about being a better investor and providing better returns. At BlackRock, we aim to be a leader in sustainable investing. Our fiduciary duty demands it. You, our client demands it. And it's about being a better investor. BlackRock has made sustainability our standard for investing and is committed to helping our clients navigate this environment. During 2020, we've been working hard to build sustainable, resilient and transparent portfolios. We've been working hard to also enhance the range of choice that we provide our clients in terms of sustainable solutions. And we've been working hard to enhance the transparency of our voting and engagement activities. For further information, please visit our website BlackRock.com or speak to your relationship manager.

Sustainable Investing – values and value

Steve Monnier, Sustainability Specialist at BlackRock Australia, discusses how the investment landscape is transforming and why – in this environment – it’s never been more important to help our clients achieve their sustainable and investment goals.

What is driving the growth of sustainable investing?

The number and diversity of investors looking for sustainable opportunities are on the rise for several reasons:
Financial
Future financial decision-makers are asking more of companies and are seeking more sustainable investment solutions.
Choice
Regulators and governments are expanding their focus on incorporating sustainability into investment information and decision making.
Risk
There is growing recognition that ESG research and analysis can potentially identify investment risks and generate excess returns.

Sustainability influences risk and return

A commonly held view is that a return sacrifice is needed when adopting sustainable investing. We disagree – and in fact believe that investing sustainably does not entail a return sacrifice.

Resilience during periods of market volatility

The downturn during the pandemic in the first quarter of 2020 was a key test of this conviction. While this short time period is not determinative, it aligns with the resilience we have seen in sustainable strategies during prior downturns. These results are also consistent with the research BlackRock has been publishing since mid-2018, demonstrating that sustainable strategies do not require a return tradeoff and have important resilient properties.1

Percentage of sustainable indices that have outperformed during downturns2
78 percent
Emerging Markets / energy downturn
21 Jul 2015 – 11 Feb 2016
75 Percent
Fed policy reaction
20 Sep 2018 - 24 Dec 2018
94 Percent
COVID-19 crisis related market selloff
1 Jan 2020 – 31 Mar 2020
81 percent
2020
1 Jan 2020 – 31 Dec 2020

Insights

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.

Our sustainable solutions

Sustainable solutions

Four ways to invest sustainably
When it comes to sustainable investing, we offer investors a comprehensive range of solutions, depending on their sustainable and financial goals. We distil investor motivations into a spectrum from Avoid to Advance as a framework to think about different sustainable investing styles.


‘Avoid’ is about minimising or eliminating exposure to certain companies or sectors associated with negative ESG characteristics that could pose reputational or other related risks, or which violate the asset owner’s values.


Advance’ is about increasing exposure to positive ESG characteristics. This might include using ESG scores as an additional layer in the traditional investment process or focusing on a specific outcome.

How you can start

01

Replace traditional core exposures with sustainable building blocks.

02

Express your views on structural environmental or social trends.

03

Seek to create positive, measurable impact with your investments.

Source: BlackRock, as at 24 June 2021

Why BlackRock for sustainable investing

BlackRock’s purpose is to help more and more people achieve well-being through wealth. We advance sustainable investing because our conviction is that it delivers better outcomes for investors.
Integrated process
Integrated process
We integrate ESG insights and data across asset classes and investment styles.
Sustainable solutions
Sustainable solutions
We deliver sustainable solutions to help our clients achieve their financial objectives.
Investment stewardship
Investment stewardship
We engage companies on sustainability issues that impact long-term performance.
Corporate sustainability
Corporate sustainability
We ensure our firm’s long-term sustainability to deliver for clients and shareholders.

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