ESG factors have been and are important to the basic understanding of a business and can be additive to investment performance since ESG characteristics also matter in a very real economic sense. ESG miscues can even harm a company’s ability to create economic value.
Related: Financial Advisors Could Fuel Growth in ESG ETF Theme
The iShares ESG-related ETFs’ underlying indices follow a quantitative selection process to exclude companies with unexpected costs in the mid- to long-term. The underlying index can calculate each company’s exposure based on business segment and geographic risk and analyzes the extent to which companies have developed strategies and programs to manage ESG risks and opportunities.
“We are going to see evidence over the long term that sustainable investing is going to be at least equivalent to core investments. I believe personally it will be higher,” Fink said. “When I go to the Nordics, the Netherlands, and France, it is almost a requirement to look at all forms of investment with sustainability in mind. Demand is getting greater and greater.”
For more information on socially responsible investments, visit our socially responsible ETFs category.