Building more resilient portfolios

Environmental, social and governance (ESG) integration is the practice of incorporating ESG information into investment decisions to help enhance risk-adjusted returns. 

There is no one-size-fits-all approach, but at BlackRock we see it as being about making research, data and insights available to all our portfolio managers and working with them to identify potential process enhancements across all investment activities.

Capital at risk. This information should not be relied upon as investment advice, or a recommendation regarding any products, strategies. The environmental, social and governance (“ESG”) considerations discussed herein may affect an investment team’s decision to invest in certain companies or industries from time to time. Results may differ from portfolios that do not apply similar ESG considerations to their investment process.

There is increasing awareness that material ESG factors can be tied to a company’s long-term performance. As such, more and more investors are looking to integrate sustainability insights and data into their traditional investment processes. 

 Leaf pictogram
Environmental (E)
Covers themes such as climate risks, natural resources scarcity, pollution and waste, and environmental opportunities.
 Group of three people pictogram
Social (S)
Includes labour issues and product liability, risks such as data security, and stakeholder opposition.
 Building blocks form a building pictogram
Governance (G)
Encompasses items relating to corporate governance and behaviour such as board quality and effectiveness.

ESG integration at BlackRock

In January 2020, BlackRock committed to putting sustainability at the center of our investment process, based on the conviction that integrating sustainability-related information into the investment process can help our portfolio managers manage risk and make better informed investment decisions.

Because we believe that climate risk is investment risk, BlackRock’s active portfolio managers seek to understand how they can use environmental, social, and governance (ESG) data as a lens to identify new risks and opportunities, and to build more resilient and better performing portfolios.  We call this practice “ESG integration”, or simply, “integration”.

Our approach to ESG integration focuses on identifying financially material sustainability insights – those that we believe may impact the financial performance of clients’ portfolios - and including those insights into the broader mix of traditional financial information used to manage those portfolios.

How sustainability considerations are sourced, assessed and incorporated will vary with a client’s portfolio objective, investment style and asset class – but all active investment teams follow the same principles in their approach to ESG integration: this includes regularly reviewing exposure to ESG risks, using a breadth of sustainability-related data and analytics to develop investment-relevant insights, and providing transparency around how sustainability-related information informs portfolio management practices. In index products– where the investment objective is to replicate a specified benchmark - ESG integration is achieved through stewardship and engagement practices and transparent reporting of sustainability characteristics.

Capital at risk. This information should not be relied upon as investment advice, or a recommendation regarding any products, strategies. The environmental, social and governance (“ESG”) considerations discussed herein may affect an investment team’s decision to invest in certain companies or industries from time to time. Results may differ from portfolios that do not apply similar ESG considerations to their investment 

Delivering on ESG integration for our clients

  • Aladdin‘s innovative modelling tools integrate more than 1200 key performance indicators  to deliver actionable, sustainability-driven investment insights.1

    1 BlackRock, June 2021.

  • sustainability-related risks are considered in the same structured investment risk management process as traditional risks like credit or liquidity risk.

  • These statements describe how and when portfolio managers assess and incorporate sustainability-related considerations, consistent with the strategy objectives and the specific asset class and investment style.

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Making sustainability our standard