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Let’s flashback to driving a car 15 years ago. Drivers would use rear and side view mirrors to merge, back up, and park. Today, thanks to advancements in technology, we have cars with rear view cameras, collision warnings, and side view sensors. These evolved safety features give drivers a more complete view of their surroundings, helping them make better decisions.

The same thing is happening with investing.  While traditional financial analysis still anchors investment decisions, the greater availability of sustainable data today gives investors a more holistic view of the companies they invest in.

Sustainable investing uncovers Environmental, Social, and Governance (or ESG)-related risks and opportunities that traditional security analysis may overlook. By giving investors a more complete view, sustainable investing helps identify companies that may be better positioned for long-term growth. Let’s zoom in.

Environmental Risks increasingly threaten company profitability through extreme weather, rising sea levels or pollution and waste. Companies exposed to frequent extreme weather events, near the water, or in a wildfire zone, may face disruptions to their operations and threaten their long-term performance.

Product liability, health and safety, and data privacy are all examples of Social risks to a

company. Companies that overlook data security risks may be susceptible to hackers or data breaches that can quickly drive down a stock price.

Board quality and diversity, fair CEO pay, and accounting practices are all Governance risks. Companies with a diverse and independent board of directors can help reduce the risk of oversight, fraud, and bribery. 

Sustainable investing doesn’t replace traditional financial analysis – it supplements and enhances it. BlackRock empowers investors to assess ESG risks in their portfolio construction process and makes it easy to get started with solutions across both iShares ETFs and BlackRock active mutual funds.

Regardless of your views on the future, long-term success is one goal that unifies all investors. BlackRock believes that investments that consider E, S and G metrics can help you pursue long-term success of not just your portfolio, but the world.