CHALLENGE
How do I transition to a sustainable portfolio and measure the impact on my overall financial and sustainable outcomes?
A tectonic shift to sustainable comes with challenges for investors. Here’s how iShares, in partnership with BlackRock, can help.
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.
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We are in the midst of a tectonic shift towards sustainable investing, with EMEA investors anticipating nearly 50% of their assets under management (AUM) to be in sustainable investments by 2025, compared with 21% in 20201. This fundamental reallocation of capital towards sustainable assets is gaining momentum. In 2020 there were net inflows of USD 425B into sustainable assets globally. In H1 2021 we have already seen USD 353B2.
We recognise there are complexities with sustainable investing and know there is no one-size-fits-all approach. After conducting over 100 client interviews3, we identified 5 challenges and investor needs:
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.
Backed by BlackRock, iShares is the investment partner who can help you make the sustainable transition with indexing, in the following ways:
How do I transition to a sustainable portfolio and measure the impact on my overall financial and sustainable outcomes?
We believe investors need a fund provider dedicated to helping investors transition their portfolios to sustainable. When you invest with iShares, you get access to the broader added value, experience and expertise of BlackRock, as we have evolved our business to meet the growing need for sustainable portfolios.
If you are looking to build a sustainable portfolio, iShares can help. We offer a range of sustainable products and can all provide multi-asset sustainable funds.
iShares.com offers transparency for investors across all our sustainable ETFs. Investors can:
Our BlackRock Multi-Asset Portfolio ESG ETFs seek to invest by having at least 80% of their assets in ETFs tracking indices that meet certain Environmental, Social and Governance (ESG) criteria. We have products across Conservative, Moderate and Growth risk profiles, all built with iShares ETF building blocks. These funds are diversified, risk-managed and cost-effective.
The funds can hold ETFs from iShares’ ESG Screened, ESG Enhanced and SRI product ranges. Under the hood, these products are managed by our Model Portfolio Solutions team who can leverage BlackRock’s scale, size and expertise to make asset allocation decisions based on considered assumptions of risk and return. Our portfolio managers are also consistently tracking the availability of new approaches to sustainable and building blocks, including impact, thematic and Paris-Aligned Benchmark (PAB) indices.
Risk: The Fund may invest in a variety of investment strategies and instruments while aiming to be highly diversified in terms of risk and returns. The Fund is therefore directly and indirectly, through its investments, subject to the risks each of these investment strategies and instruments are subject to.
How do I find and interpret ESG data to assess a sustainable fund?
When investing sustainably, we believe investors need to know what they own and be able to quantify the measurable output of their investments. iShares takes a robust, rigorous approach to assess the quality and accuracy of ESG data across the benchmark indices that our new and existing products track.
In 2020, BlackRock added 1,200 sustainability metrics to Aladdin®, our risk and portfolio management system, and established data partnerships with Sustainalytics, Refinitiv and Rhodium to understand ESG and physical climate risks5. This data feeds into both our risk management platform and our full investment process - from research, to portfolio construction, modelling and risk management and reporting. Our Risk and Quantitative Analysis team can use Aladdin® ESG data to monitor indexed funds relative to their benchmarks from an ESG perspective.
Risk: While proprietary technology platforms may help manage risk, risk cannot be eliminated.
We are committed to providing transparency, so you can find aggregated ESG data for each fund in our iShares sustainable ETF range on iShares.com and compare our ETFs on this basis.
BlackRock’s portfolio management team use ESG data in Aladdin® to assess holdings in our sustainable products at the issuer level, monitoring how this has changed and anticipating future evolutions to the indices we track. Aladdin® also allows us to interpret this ESG data and the historical impact on the performance of iShares ETFs’ alongside traditional risk/return drivers. We can show historically how an iShares sustainable fund impacts both investment and sustainable outcomes.
Across BlackRock we are dedicated to analysing and interpreting ESG data - working with data providers to improve these metrics, offering you transparency to access and understand this data and helping to drive a push for standardisation across the industry to bring consistency and transparency to all investors.
Risk: 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.
1,200 sustainability metrics added to Aladdin in 2020 to understand ESG and physical climate risks.
Source: BlackRock Portfolio Analysis and Solutions (EMEA) from 1 January 2019 – 31 December 2020.
Our Index Insights team offer in-depth analysis of ETF indices across the industry, so you can compare ESG data points, alongside traditional risk/return drivers across indices. See how the iShares sustainable range stacks up with our iShares compare tool.
With so many sustainable products, how do I find the sustainable fund that meets my needs?
We believe investors need clarity, choice and - most importantly - quality. With 48 sustainable ETFs launched industry wide in Europe alone in 2021 with myriad methodologies, there are so many products to consider6. iShares can help investors navigate the sustainable landscape and select products that meet their financial and sustainable investments goals.
We know investors need clarity when choosing a sustainable product, so we want to help. Investors can navigate to iShares ETF and index products that align with their investment and sustainable goals using BlackRock’s Sustainable Investing framework. This framework classifies iShares ETFs and index products according to four sustainable approaches.
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.
You can choose from a full range of sustainable building blocks across asset classes and sustainable approaches, to help you find the suite that meets your portfolio needs.
Screened
Funds that seek to track indices that eliminate exposure to certain business areas.
ESG Broad
Funds with an explicit ESG objective, which may include a targeted quantifiable ESG outcome.
ESG Thematic
Funds that focus on a particular Environmental, Social, or Governance theme.
Impact
Funds that seek to generate a measurable sustainable outcome, alongside a financial return.
Want help navigating to a sustainable option? The iShares product screener maps our ETFs to sustainable options. The product screener includes Environmental, Social and Governance (ESG) data metrics, so you can filter our range to align to your needs.
iShares gives you choice, we have more sustainable ETFs registered on more European stock exchanges than any other provider and we manage USD 50B in AUM across 55 ETFs in Europe7. We offer the ability to scale a consistent approach across the whole portfolio with sustainable indexing alternatives in equities and fixed income across all sectors of the market from screened exposures to impact investing.
Investors want quality products, built to evolve with new regulation and the fast-changing sustainable investing landscape. iShares sustainable ETFs are built with the same expertise, rigour and high standards as all our iShares products.
What’s under the hood matters. iShares sustainable ETFs are managed by global teams of over 60 equity and over 70 fixed income BlackRock portfolio managers9. At BlackRock, sustainability has been integrated into our investment process so our portfolio managers are sustainability experts, using the power of Aladdin®, BlackRock’s global risk management platform to analyse funds across many investment risk factors and sustainable considerations.
Risk: While proprietary technology platforms may help manage risk, risk cannot be eliminated.
130 portfolio managers’ combined experience and expertise goes into designing and managing our sustainable ETFs.
Source: BlackRock, as of 30 June 2021.
At iShares, we consistently engage and advocate globally with leading index providers on behalf of our clients. We do this to develop new innovative indices and enhance existing exposures as part of our firmwide commitment. Our sustainable investing approach is dynamic, and we continue to innovate to reflect evolution in sustainable indexing, changing regulations and feedback and insights from our clients.
How do I incorporate climate into my portfolio and measure the impact?
The sea change towards sustainable investing is moving fast. As new trends start to emerge it can be difficult to know how to start incorporating these trends into your sustainable portfolio. iShares can help, offering products that enable you to incorporate climate considerations into your portfolio.
In 2020 alone, natural disasters led to an estimated USD 120B in damages, the highest ever recorded10. Reshaping the global economy to meet the climate threat will have major financial ramifications. With the number of companies disclosing on climate change almost doubling in the last 5 years11, this is an emerging trend that we believe is here to stay, so iShares is innovating in climate investing. At BlackRock we believe that climate risk is investment risk. In 2021 we committed to offering our clients a full set of climate-oriented investment options, including ETFs.
In 2020 alone, natural disasters led to an estimated USD 120B in damages, the highest ever recorded.
Source: Munich Re NatCatService database (as of 30 March 2021).
From broad building blocks to targeted exposures, iShares now has three approaches to climate investing to help you navigate our range and select the climate option for you.
For illustrative purposes only. The above list is not exhaustive but represents various ways investors can take specific climate objectives into consideration.
Find out more about integrating climate into your portfolio with ETFs.
For investors who have made a net zero commitment, looking to transition to a low-carbon economy or align their portfolios to the EU’s Paris Aligned Benchmark (PAB) regulation, iShares launched a range of Paris-Aligned Climate ETFs in 2021.
These ETFs offer building blocks to switch to climate investing across developed market equity exposures.
How can I ensure my sustainable fund provider is driving long-term value through engagement with companies?
BlackRock provides a voice to help drive long-term value through company engagement. We are a focused steward working on behalf of our clients to advocate for sound corporate governance and business models that can help drive sustainable, long-term financial returns.
BlackRock has one of the largest and most diverse global investment stewardship teams in the industry12. We operate across ten offices globally and engage locally with companies, enabling more frequent and better-informed dialogue, often in local language. BlackRock was founded on the core premise of understanding investment risk and thinking into the future for our clients. We believe climate risk is investment risk and we have built our team to support engagement with companies, big and small and at all stages of their sustainability integration journey, to help enhance the financial resilience of our clients’ long-term investments.
offices
voting markets
member team
Source: BlackRock, as of August 1, 2021
Index investing can drive long term value for investors, with index funds typically remaining invested in a stock for as long as it remains in an underlying index – often many years. With 90% of the listed equities BlackRock manages on behalf of clients in index funds, BlackRock’s Investment Stewardship team is particularly important for our client’s index holdings, in which we are essentially permanent shareholders. We cover almost every corner of the investment universe in our indexing range across the globe13.
During the 2020-2021 proxy year, BlackRock’s engagements with investee companies hit a new record. We held more than 3,650 unique engagements with over 2,300 companies. We held over 2,300 engagements on climate, voted against 319 companies on climate risk related concerns (about 2% of companies globally), and supported 64% of the environmental shareholder proposals voted14.
Our Investment Stewardship toolkit
Find out more about BlackRock’s Stewardship team and how the team voted at various shareholder meetings.
Unique engagements
Supported shareholder proposals (297 out of 843)
Shareholder meetings we voted against management*
Source: BlackRock, Institutional Shareholder Services (ISS). Data as of July 8, 2021. Sourced on July 8, 2021, reflecting data July 1, 2020 through June 30, 2021.
*Includes abstentions and reflects percentage of shareholder meetings where we voted against management on one or more proposals. See “Pursuing long-term value for our clients.”