Potential outperformance opportunities driven by sustainability data

Investors can use emerging data and research in the pursuit of excess returns compared with the broader market.

BlackRock said in 2020 that climate risk is central to investment risk, and that we believe sustainable assets will outperform non-sustainable assets over the long term. 

We believe that a key component of the outperformance we predict will be driven by a vast reallocation of capital toward sustainable assets and strategies in the coming years.1  But there’s more to the story than investment flows. 

We also believe that the coming transition to an economy that is less dependent on greenhouse gas emissions, an explosion of sustainable datasets, and new research techniques will present investors with opportunities to drive outperformance at the portfolio and individual security levels. 

Sustainable data and emerging research to identify the companies with the right mix of opportunity and risk to outperform amid the shift to sustainability. This is an opportunity for active investors in the coming years, in our view.

In short, we believe sustainability affects investment returns in three ways:

  • the "tectonic shift" in investor preferences that drives investment flows into sustainable assets and reduces sustainable firms’ cost of capital
  • the use of innovative data sources and fundamental research to help spot sustainable business practices and business models; and
  • the evolving relationship between sustainability and traditional style factor investing.

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1BlackRock Investment Institute, “Sustainability: The tectonic shift transforming investing,” February 2020.