Sustainable Investing:
Resilience Amid Uncertainty

  • Brian Deese, Global Head of Sustainable Investing

  • As the coronavirus pandemic has unfolded, it has forced us to question many of our basic presumptions as investors. And the same is true for sustainability.

    So what have we seen?

    BlackRock Bottom Line Open

    Title: Sustainable investing: Resilience amid uncertainty

    There's long been a concern that when it comes to sustainable investing, when we hit a market downturn and we hit a disruption, that would cause investors to run away from sustainable.

    What we've seen in this crisis, it's obviously a short time period but is striking, is the opposite. That notwithstanding, a dramatic and historic market drawdown, we've seen record inflows into sustainable strategies during this same period.

    And that reinforces the view that the structural shift in investor preferences is more durable than short-term market movements. 

    We have seen a striking degree of resilience associated with companies and portfolios that have greater sustainability characteristics. More than 90% of sustainable indices outperformed their parent benchmark during the period of the heightened market uncertainty and drawdown associated with this crisis. 

    (Source: BlackRock, with Q1 data from Bloomberg and Morningstar as of May 7, 2020)

    Companies that are focused on their employees and their customer base and the communities that they operate in are able to operate more nimbly in an environment where what was assumed in the past can no longer be assumed. It makes them more agile and more able to weather uncertainty.  

    As we look forward, just as how companies have treated their employees and their stakeholders in the current crisis has been a differentiator, we believe how companies invest in their employees' health and safety will be even more important. 

    Second, there's going to be an increased expectation on companies around traditional governance issues, but also questions of a company's purpose and its contribution to the communities that it operates in.

    Across all these areas we believe that sustainability issues will become even more salient in the investment conversation going forward. 

    The bottom line is that sustainability has been tested during this crisis and as we look forward, we believe that sustainability will be even more important to how we invest and how companies succeed over the long term.