Why are markets seeing green?

Every other week, we ask for your thoughts on a top question our portfolio managers and strategists are debating. We share the final poll results and insights.

    Sustainable investing funds have attracted large inflows this year to date, extending a trend seen in 2020. Which do you believe is the main catalyst for the green portfolio transition?

    Poll responses

    Poll results: Which do you believe is the main catalyst for the green portfolio transition?

    Source: Blackrock Investment Institute, with data from SurveyMonkey. Note: Data does not include results from BlackRock social media polls.

    Votes from our public poll showed policy/regulation (36%) and value-based preferences (36%) were seen as the most likely catalysts for the green portfolio transition. The next most popular responses, with roughly 18% and 10% of the vote, respectively: better data and recent outperformance.

    In line with public views, the majority of BlackRock portfolio managers (55%) see policy and regulatory changes as the biggest driver of a tectonic shift to sustainable investing.

    Views on the inside

    Most BlackRock portfolio managers and strategists believe it is the momentum in policy and regulations – from the U.S. re-joining the Paris accord to China committing to a net-zero economy by 2060 – that has been key in driving the shift toward sustainability. 

    Interest is growing, particularly in Europe, in Paris-aligned investment solutions that are consistent with the transition to a net-zero carbon economy. This is reflected in BlackRock’s recent commitment to publish a temperature alignment metric for our public equity and bond funds.

    BlackRock’s fixed income team believes that finding alpha in fixed income will be about more than simply excluding companies with low environmental, social and governance (ESG) ratings. It is hard to see a catalyst that would slow the positive sentiment and flows pouring into sustainable funds, many believe. Investors are becoming more sophisticated on sustainable investing and want to reward companies committing to a net-zero carbon transition.  

    This task is becoming easier as improvements in data quality and analytical insights help foster greater adoption of ESG in the asset management industry.

    Pioneering research

    This question of the week on sustainability coincides with the launch of the BlackRock Investment Institute’s (BII) climate-aware return assumptions (CMAs). We believe the launch is a significant innovation that puts the focus on the opportunities stemming from the transition to a net-zero carbon world, as highlighted by CEO Larry Fink in his letter to clients.

    BII has refined its framework for the macro outlook and CMAs to incorporate climate change and sees a green transition as a net positive for the economy ­– a pushback against the popular notion that saving the environment must come at a cost to growth. The positive effect of this transition rests on a gradual phasing in of carbon taxes, green infrastructure spending consistent with the IMF’s recommendation, and subsidies on renewable energy. If none of these actions are taken to mitigate climate change, BII estimates a cumulative loss in global output of nearly 25% in the next two decades.

    Stay ahead of markets with the latest insights from the BlackRock Investment Institute.

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