RESHAPING SUSTAINABLE INVESTING

Four forces that will accelerate sustainable index adoption and drive $1 trillion in new assets this decade.
Source: BlackRock as at 31 March 2020. $1 trillion refers to USD.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Risk: This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This is for illustrative and informational purposes and is subject to change. It has not been approved by any regulatory authority or securities regulator. The environmental, social and governance (“ESG”) considerations discussed herein may affect an investment team’s decision to invest in certain companies or industries from time to time. Results may differ from portfolios that do not apply similar ESG considerations to their investment process.

A transformative shift is taking place in financial markets. Money is flowing into investment strategies that emphasise the most sustainable companies. At the same time, investors are growing wary about allocating capital to companies that fail to demonstrate a commitment to sustainability. Inflows have persisted into sustainable index ETFs in early 2020 in the face of pandemic-related market turmoil, underscoring persistent and growing investor demand for sustainable strategies.1

1 Source: BlackRock as at 31 March 2020.

Underpinning demand is a view that corporate environmental, social, and governance (ESG) attributes, such as environmental stewardship and gender pay equity, influence long-term investment risks and opportunities. Investors now parse ESG metrics alongside traditional financial metrics and integrate ESG considerations into their decision-making processes. Importantly, the quality of the data that guides such decisions is getting sharper.

This paper outlines four forces will help grow assets in global exchange traded funds (ETFs) and index mutual funds by roughly $1 trillion by 2030.

Four forces:

  • Recognition that sustainability influences risk and returns
  • Better data leading to better indexes
  • Access to ESG at a fraction of the cost through indexation
  • Sustainable choices for every portfolio

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