SUSTAINABLE MYTHBUSTING

Getting the facts straight on sustainable index investing.

We believe sustainability is the future of investing. With an improvement in investment data, more sophisticated ESG analysis and a broad range of products to choose from, investors have more choice than ever before when building sustainable portfolios. However, the industry’s rapid growth has led to the propagation of several myths and misconceptions regarding sustainable indexing. This guide aims to debunk these myths and help give investors the clarity they need to build more sustainable portfolios.

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.

Getting the facts straight

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Myth 1: Sustainable investing lacks a common definition; there are no clear standards for building a sustainable portfolio.

Fact: There are several standard methods to invest sustainably. Indexing can help you clearly align your investment approach with your sustainable and financial goals.


Myth 2: Sustainable investing is too nuanced for indexing and requires active management to express investor values and preferences regarding environmental, social and governance (ESG) factors.

Fact: Index investing enables investors to implement their sustainability preferences in an explicit and consistent way across exposures.


Myth 3: Index fund managers lack the stewardship tools to drive change.

Fact: Index fund managers deploying active investment stewardship can drive long-term change.


Myth 4: Sustainable indexing works for equities but not for fixed income exposures, and fixed income ESG data will continue to lag behind equities.

Fact: Sustainability preferences can be applied across a range of fixed income exposures, and the drivers of ESG demand in fixed income are similar to those for other asset classes.


Myth 5: Sustainability comes at a premium.

Fact: Indexing is bringing access to sustainable investing at a fraction of the cost.


Myth 6: You have to sacrifice performance when using sustainable indexing.

Fact: Early evidence on ESG index performance strongly challenges the tired misconception that sustainable investing requires giving up financial returns for better ESG outcomes.

Source: BlackRock, as at 30 April 2020. This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This is for illustrative and informational purposes and is subject to change. It has not been approved by any regulatory authority or securities regulator.

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