How will climate change affect markets?

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.

Climate change is now part of mainstream investment. Consensus is growing that climate risk is investment risk. We also face a pivotal juncture in global politics on this issue. There will be winners and losers but overall, how do you see a green transition affecting risk asset returns?

    You responded:

    Poll results: How will climate change affect markets?

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

    46.51% -----------------------------------

    A boost

    20.93% -----------------

    It's already priced-in

    16.28% ---------

    A drag

    16.28% ---------

    Impossible to know

    At BlackRock, a chunky majority of portfolio managers also believe that a green transition will be a boost – positive for both growth and risk assets over the medium and long term. This result may come as a surprise amid lingering concerns that integrating sustainability into portfolios involves a trade-off between values and returns. This view is fast changing amid a tectonic shift toward sustainability.

    The BlackRock Investment Institute’s work on capital market assumptions shows the need for incorporating climate change into growth projections. Looking through a climate-aware lens helps to account for what may be substantial damage to the growth trajectory over the next two decades. Progress towards meeting zero-carbon goals includes investment and innovation that can offset costs. This also means a notable improvement over the new baseline growth projection incorporating climate change effects. We see sustainable assets outperforming over the long transition to a low-carbon world.

    The impact of climate change. China's fight against pollution – one of three critical battles President Xi outlined in 2017 – could be central to the party's policymaking as outlined in its new five-year plan. One example: the commitment to net-zero carbon emissions by 2060. The BlackRock Sustainability Investing team sees a Biden presidency leading to: 1) a coordinated global effort on green fiscal investment; 2) harmonization among countries on carbon pricing, and; 3) greater international adoption of 2050 net-zero carbon goals – such as the European Union’s recent commitment – that could cover more than two-thirds of global emissions. A sustainable energy portfolio manager sees different areas of the renewables market growing substantially each year over the next decade. Growth may come from renewable electricity, which has room to further grow its share of global power generation. We are also likely to see refitting of buildings to be more green and significant growth in electric vehicles, which still account for less than 1% of today’s global auto fleet.

    Our latest research explores the impact from water risks on risk assets as well as the shift into sustainable bonds. Learn more about our commitment to sustainability.

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