Socially responsible investments that include a focus on environmental, social, and governance, or ESG, factors are beginning to make their way into institutional investment portfolios, with the world’s largest money manager also doubling down on its commitment to sustainable investing.
At the annual Morningstar Investment Conference in Chicago, BlackRock CEO Larry Fink said that by the end of this year, 100% of its portfolios will integrate ESG metrics, up from 70% at the end of April, Financial Planning reports.
“We are committed by the end of 2020 to have all our portfolios integrated to ESG,” Fink said at the conference, InvestmentNews reports. “Climate risk is investment risk.”
The asset manager will provide data and analytics that highlights the value of issues like climate change.
“As we sit here today, we have raging fires. We have a hurricane. We have five tropical storms in the Atlantic. We have had record heat throughout the world,” Fink said at the conference. “We are seeing more and more examples of how climate change is becoming investment risk.”
Fink, though, said BlackRock won’t be altering major broad market indices to suit any particular ESG objective.
“This is not our money; our job is to show investors what climate risk does to portfolios, and to educate and persuade, but our job is to always be a fiduciary,” Fink said. “I’m an environmentalist. I understand what the environmentalists are asking for. Yet if they truly want to make a difference, they need to go to the asset owners. When customers want the S&P 500, they don’t want the S&P 494.”
Furthermore, Fink underscored the greater need for money managers to take responsibility to educating investors as to what climate risk can mean for long-term investment returns.
“Our job is to educate. Our job is to persuade,” Fink said.
Fink also highlighted the importance of the ETF investment tool that has helped both active management and retail investors achieve their goals, such as the recent increased interest for ESG-related investment funds.
“What we’re witnessing in the past few years in the growth of ETFs is not passive investing, we’re seeing more active investors use passive ETFs to get their active exposure,” Fink said. “One of the real myths is that everyone investing in passive ETFs are passive investors. They are not.”