The world’s largest asset manager, BlackRock, is making waves by putting the effects of climate change at the center of its investment decisions.
The CEO of BlackRock, Laurence Fink, published a letter to CEOs working with the firm which said that “the evidence on climate risk is compelling investors to reassess core assumptions about modern finance.”
“Climate risk is investment risk,” the letter says.
“As a fiduciary, our responsibility is to help clients navigate this transition. Our investment conviction is that sustainability and climate-integrated portfolios can provide better risk-adjusted returns to investors,” it reads.
“And with the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward.”
BlackRock says that their clients have been asking more about climate change and sustainability and how they should invest in the future today.
As the market grows, BlackRock is looking at solar and wind power as a longer-term investment and considering these energy sources as prospective new products for sustainable business.
The company has asked for other companies to report on and measure their sustainability through organizations like the Sustainability Accounting Standards Board — which helps businesses manage, identify, and report on sustainability-related issues — and the Task Force on Climate-related Financial Disclosures — which provides information to insurers, investors, stakeholders, and lenders on climate-related financial risk disclosures.
The firm also plans to incorporate environmental, social, and governance data into their investment choices. This can help account for sustainability in areas like company-wide energy usage, pollution, and waste. Data can also be used to develop investment strategies when it comes to “intangible” assets like company reputation and brand value.
In the long run, BlackRock says this will help yield the best return on investment for long-term clients.