Sustainability in BlackRock: World’s largest fund manager champions sustainability
February 18, 2020
2 min read
What's going on here?
BlackRock, the world’s largest fund manager, has revamped its investment approach by deciding to implement sustainable investment principles throughout the company.
What does this mean?
In recognition of the socio-economic threat and the subsequent investment risks that climate change poses, BlackRock has rolled out a number of schemes to make sustainability a core pillar in its future investment decisions.
Some of these initiatives include making sustainability a standard part of its investment solutions, even part of its flagship model portfolios. BlackRock also aims to fully integrate environmental, social and corporate governance (ESG) into all its active portfolios and advisory strategies by the close of 2020. This commitment to sustainability is further reinforced by the firm’s critical decision to withdraw from thermal coal producers in light of the industry’s carbon intensive processes.
What's the big picture effect?
The overwhelmingly positive response to this decision was immediate, with an inflow of $1.5bn into BlackRock’s iShares the day following the announcement. This highlights the widespread approval of BlackRock’s current trajectory amongst both industry leaders and investors alike. Arguably, this also serves as evidence of a wider global trend in favour of promoting sustainable market practices and a greater awareness of climate change’s negative effects by investors.
As more companies move towards increasingly eco-friendly business practices, growing transparency of a company’s machinations and spending will be paramount in order to meet these lofty sustainability goals. This is likely to increase scrutiny by stakeholders on all sides and also increase access to sustainable investment to individuals who did not have such data available to make informed investment decisions. More so, for enormous firms like BlackRock, it is critical that stakeholders are able to hold these companies to account.
While the added expense of implementing such measures may act as a setback for BlackRock initially, the immediate financial success of this announcement may only serve to accelerate the growth of investment in socially responsible investment trends. It is thus imperative that legal professionals monitor subsequent changes in the factors that affect clients’ decisions regarding potential acquisitions and other investments. Should negative attitudes towards climate change persist, these observations will allow lawyers to tailor their advice to clients in accordance with these growing concerns on climate change.
Report written by Debra Lim
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