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BlackRock research highlights potential outperformance opportunities driven by sustainability data

 

  • Research Points to Innovation, Business Catalysts and Asset Flows as Factors that Can Lead to Outperforming the Broader Market

  • New Equity and Fixed Income Strategies Provide Innovative Exposure to Broad Sustainable Investing and Impact Investing

New research from BlackRock highlights how sustainability-oriented business catalysts and data help active investment managers identify companies that may be positioned to outperform as the world transitions to a net zero economy.

An estimated USD50 to USD100 trillion in capital investment is required to successfully transition to a net-zero global economy[1]. BlackRock research shows that as more companies participate in the journey to net zero during this period of monumental economic change, active investors can increasingly find opportunities with potential to outperform the traditional equities market in three ways: by incorporating sustainable insights into their investment strategies, identifying climate-related financial catalysts and incorporating them into the investment process, and seeking out investment opportunities in emerging technologies.

“We’ve been clear about our conviction that sustainability criteria has material impacts on investment returns, and our latest research builds on our thesis,” said Rich Kushel, Senior Managing Director and Head of the Portfolio Management Group at BlackRock. “The key to active management is our ability to consistently identify companies and data points that can help us generate investment alpha. The incorporation of sustainability analytics is an increasingly important component to assessing the potential of companies and technologies as sources of return.”

Providing More Active Sustainable Options

Harnessing its active management insights has been critical to BlackRock creating sustainable investment opportunities for clients, ranging from broad ESG designs to targeted social and environmental themes. BlackRock has an extensive and rapidly expanding range of sustainable active funds and strategies, across all asset classes, to help investors pursue their specific sustainable goals.

Becci McKinley-Rowe, Co-Head of Fundamental Equities at BlackRock said: “As active, fundamental investors, we take the long view. Sustainability is about the future and companies that are forward looking and embrace best practices, have the potential  to outperform in the long run. At the same time, we recognize clients need diverse and transparent product choices to achieve their sustainable investment goals, so we continue to innovate and expand our fundamental equity sustainability offerings, including the recent launch of our Core Sustainable range.”

BlackRock manages USD401 billion[2] in its sustainable investment platform and has a target to grow it to USD1 trillion AUM over the next 10 years. In EMEA, BlackRock’s sustainable investment platform’s AUM is now USD301 billion[3], up from USD135 billion in 2020[4]. Comparatively, Active (ex Cash) stands at USD41 billion AUM[5], compared with USD30 billion AUM[6] last year.

Reflecting these trends, BlackRock’s latest active sustainable platform enhancement includes the launch of five new funds in EMEA, which are also available to APAC investors: a regional equity  range made up of four different broad sustainable strategies, and a fixed income fund in its Impact Investing range:

Broad ESG – Fundamental Equity Sustainable Suite

This range of four funds is designed to meet clients’ needs for Sustainable equity productsin core regions.

The portfolio managers identify and invest in businesses that are leaders or improvers, as well as enablers of sustainability, across the breadth of the market, with the objective of delivering attractive returns alongside measurable sustainable outcomes.

The Core Sustainable Suite comprises:

  • BGF Emerging Markets Sustainable Equity Fund – which provides investors with exposure to the broad, diverse and dynamic Emerging Markets equities sector. It looks to identify misunderstood and under-appreciated opportunities within the universe of companies that are run in a sustainable way.
  • BGF European Sustainable Equity Fund – which invests in companies that can lead in a more sustainable world through innovation and best in class business practices.
  • BGF Developed Markets Sustainable Equity Fund – which invests in a sustainable universe across the breadth of developed markets capturing trends driving public and private capital towards energy transition and efficiency, social equity and financial inclusion, sustainable products and services, and health and well-being.
  • BGF US Sustainable Equity Fund – which aims to invest in best-in-class ESG companies as well as sustainability enablers, while also leveraging corporate engagement to identify future ESG leaders.

Impact – BGF Emerging Markets Impact Bond Fund

This is an emerging markets impact strategy that invests in Green, Social and Sustainability (GSS) bonds with the intention to generate positive, measurable social and/or environmental impact alongside a financial return.

  • BGF Emerging Markets Impact Bond Fund – seeks to deliver capital growth and income over the long term by investing 80-100% in GSS bonds in Emerging Markets.

 Notes

  1. The BlackRock Core Sustainability Suite implements exclusionary screens eliminating about 20% of the range’s universe as follows:
  • UN Global Compact Violators, excluding companies violating at least one of the 10 Global Compact principles
  • Business Involvement screens, based on percentage revenue thresholds for the following categories:
  • Thermal coal & tar sands
  • Petroleum extraction
  • Nuclear power generation
  • Energy generation from coal, oil or gas
  • Weapons
  • Tobacco
  • Alcohol
  • Adult entertainment
  • Gambling
  • ESG ratings, excludes all CCC ESG rated companies, using MSCI ESG scoring
  • Climate screens, excludes top 5% of carbon emitters from benchmark, as measured by carbon emissions intensity (by capital).
  1. Broad ESG funds target quantifiable ESG outcomes across broad market exposure, evaluating companies on their ESG practices to identify risks and opportunities.
  2. Impact Investing funds seek to generate positive, measurable social and environmental impact alongside a financial return, and must adhere to the Operating Principles for Impact Management.

[1] Intergovernmental Panel on Climate Change (IPCC), “Mitigation Pathways Compatible with 1.5°C in the Context of Sustainable Development,” in An IPCC Special Report on the impacts of global warming, 2018.

[2] In our dedicated sustainable investment platform, including baseline screened, ESG broad, sustainable thematic and impact funds, as at 30 June 2021.

[3] BlackRock, as at 30 June 2021

[4] BlackRock, as at 31 December 2020

[5] BlackRock, as at 30 June 2021

[6] BlackRock, as at 31 December 2020

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