Sustainable Investing
We believe sustainability-related issues – ranging from board composition to human-capital management to climate change – have real impact.
Why BlackRock for sustainable investing?
At BlackRock, sustainable investing spans a range of strategies that combine traditional investment approaches with environmental, social and governance (ESG) insights to seek to deliver both financial and purpose-driven outcomes.
We are passionate about providing clients a clear picture of how sustainability-related issues affect risk and long-term financial performance.
What’s next for sustainability in 2020?
Brian Deese, Global Head of Sustainable Investing, discusses the importance of considering sustainability risks in financial investments.
Learn more about sustainable investing at BlackRock
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Growth of sustainable investing
Sustainable investing strategies have grown rapidly in recent years, and this trend shows no signs of slowing.
There’s no guarantee that forward-looking estimates will come to pass.
Sources: BlackRock, with data from Broadridge/Simfund, June 2018. Notes: The chart shows the total assets under management in ESG mutual funds (MFs) and ETFs globally. The 2019 to 2028 figures are based on BlackRock estimates, assuming a 5% annual growth rate in the underlying markets. Other assumptions: MF asset growth starts at 5% in 2019 and declines by 0.5% annually through 2022, then at a zeroto-0.5% rate annually thereafter. ETF asset growth starts at 45% and decreases by 5% annually through 2022, with a zero-to-3% pace thereafter.
What is driving the growth of sustainable investing?
The number of investors looking for sustainable opportunities is on the rise for several reasons:
Looking after our clients' assets for the long term
As a fiduciary investor, we work on behalf of our clients, the asset owners.
Engagement priorities
Our engagement priorities promote sound corporate governance and business practices that are consistent with sustainable long-term financial returns. We determine our engagement priorities based on our observation of market developments and emerging governance practices and evolve them year over year as necessary.
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We focus on board composition, effectiveness and accountability as a top priority. In our experience, most governance issues require board leadership and oversight. We engage to better understand how boards assess their effectiveness and performance, as well as their position on director responsibilities and commitments, turnover and succession planning, crisis management, and diversity.
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We expect boards to be fully engaged with management on the development and implementation of the company’s strategy. Companies should succinctly explain their long-term strategic goals, the milestones that demonstrate progress, and any obstacles anticipated or incurred.
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We expect executive-pay policies to use performance measures that are closely linked to the company’s long-term strategy and goals to ensure executives are rewarded for delivering strong and sustainable returns over the long-term, as opposed to short-term hikes in share prices.
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Sound practices in relation to the material environmental factors inherent to a company’s business model can be a signal of operational excellence and management quality. Environmental factors relevant to the long-term economic performance of companies are typically industry-specific, although in today’s dynamic business environment, some, such as regulation and technological change, can have a broader impact. Corporate reporting should help investors and others understand the company’s approach to these factors and how risks are integrated, and opportunities realized.
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In a talent-constrained environment, we view a company’s approach to human capital management as a potential competitive advantage. We expect disclosure around a company’s approach to ensuring the adoption of the sound business practices likely to create an engaged and stable workforce.
ESG integration
There is increasing awareness that material environmental, social and governance (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. By expanding access to data and insights on material ESG risks and opportunities we can become better overall investors.
Learn more about ESG integration
Different sustainable investing styles
There is a wide range of strategies available to investors looking for dedicated sustainable investment solutions. At BlackRock, we distil client motivations into a spectrum from Avoid to Advance.
- “Avoid” strategies involve the elimination of certain companies or sectors that are associated with increased ESG risk or that violate the asset owner's values.
- “Advance” strategies focus on increasing exposure to positive ESG characteristics to align capital with certain behaviors or to target specific positive social or environmental outcomes.
Sources: BlackRock Sustainable Investing, December 2019.
Sustainable, or ESG-focused, strategies carry risks like any other investments, yet we see encouraging evidence that investors can potentially make their portfolios more sustainable without compromising on traditional financial goals.
BlackRock’s latest sustainable investing insights
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Meet our team
BlackRock’s sustainable investing team is focused on identifying drivers of long-term return associated with environmental, social, and governance (ESG) issues; integrating them throughout BlackRock's investment process; and creating solutions for our clients to help achieve sustainable investment returns.
Leadership
Corporate sustainability
BlackRock’s purpose is to help more and more people experience financial well-being. As a large investor, we are able – and feel a responsibility – to monitor the companies in which we invest and to engage with them where we believe that would help preserve clients’ interests.
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