INVESTORS’
TOP 5 ESG
CHALLENGES

A PARTNER IN HOLISTIC SUSTAINABLE PORTFOLIO CONSTRUCTION

Whether you are looking to evaluate, evolve or start building a sustainable portfolio, when you invest with iShares, BlackRock can help. From providing investment strategy and consultations on portfolio construction to offering model portfolio solutions, trading strategies and transition management.

EVALUATE, EVOLVE & BUILD SUSTAINABLE PORTFOLIOS

Over the last 2 years, the BlackRock Portfolio Analysis and Solutions team (BPAS) has analysed over 1,400 client portfolios, covering USD 500B in AUM across Europe and designed 450 investment solutions for our clients⁵. Throughout this period, we have seen a significant increase in ESG-focused engagements and solutions. Sustainable increased from just 15% of our total consultations in H1 2019, to 24% in H1 2020 and all the way to 57% in H1 2021⁶.

BPAS CAN HELP:

• EVALUATE your portfolio’s holistic sustainability profile using ESG data to show your ESG Quality Score, Carbon Emissions Intensity, Low Carbon Transition metrics and exposure to Business Involvement areas. Get a panoramic view of your portfolio’s risk drivers and sustainable characteristics backed by BlackRock’s risk and portfolio management platform Aladdin®.
• EVOLVE your portfolio’s sustainability metrics with product substitutions, using alpha-seeking, factor and index sustainable funds. Compare the resulting sustainable portfolio with your original allocations in terms of sustainability metrics, risk drivers, historical performance and costs. Based on your specific risk, return and sustainability requirements, you can transform your existing strategic asset allocation to improve its sustainable features.
• BUILD a sustainable proposition, based on your sustainability objectives. Design your strategic asset allocation with the help of BlackRock’s climate-aware capital market assumptions and various portfolio implementation options across alpha-seeking, factor and index. Replicate a non-sustainable benchmark or fund with sustainable building blocks.

ACCESS READY-MADE SUSTAINABLE PORTFOLIOS

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 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 and use BlackRock’s climate-aware capital market assumptions  to help inform the portfolio construction process.

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.

BlackRock’s Model Portfolio Solutions team also offer model portfolios and also tailored solutions – find out more here.

SUSTAINABLE IMPLEMENTATION

When you have determined the sustainable approach that works for you, BlackRock’s Transition Management team (TRIM) can help manage the implementation of your transition to a sustainable portfolio.

All these options can incorporate iShares ETFs, building blocks that bring transparency, liquidity and lower costs with instant access to sustainable investing.

TRANSPARENCY, CONSISTENCY…

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 risks⁷. 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.

…AND SUSTAINABLE EXPERTISE

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 driving 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.

CLARITY NAVIGATING SUSTAINABLE OPTIONS

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.

Choose from a full range of sustainable building blocks across asset classes and sustainable approaches, select the suite that meets your needs and implement across your portfolio.

Want help navigating to a sustainable option? The iShares product screener maps our ETFs to sustainable options. The product screener includes ESG data metrics and SFDR classifications, so you can filter our range to align to your needs.

CHOICE, WITH THE LARGEST, MOST COMPREHENSIVE RANGE

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 Europe⁹. 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. These include 48 Article 8 and 4 Article 9 products¹⁰.

INVESTORS NEED QUALITY PRODUCTS

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 managers¹¹. 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.

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.

Looking ahead is imperative. As sustainable investing goes mainstream, iShares is also investing in the sustainable ETF ecosystem We are working with stock exchanges and market makers to develop sustainable ETF options, sustainable indexed futures and the sustainable ETF lending market.

CLIMATE: AN EMERGING TREND

In 2020 alone, natural disasters led to an estimated USD 120B in damages, the highest ever recorded¹². 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 years¹³, 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.

WAYS TO ACCESS CLIMATE INVESTING

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.

Find out more about integrating climate into portfolios with ETFs.

ALIGNING WITH THE EU PARIS ALIGNED BENCHMARK

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.

BlackRock Portfolio Analysis and Solutions team (BPAS) can help you evolve, evaluate and build a climate portfolio to meet your sustainable investment needs.

GLOBAL REACH AND LOCAL PRESENCE MATTERS

BlackRock has one of the largest and most diverse global investment stewardship teams in the industry¹⁴. 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.

LONG-TERM VALUE FOR INVESTORS

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 globe¹⁵.

ENGAGEMENT, VOTING, AND TRANSPARENCY

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 2,326 companies across 71 country markets. 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 voted¹⁶.

Our Investment Stewardship toolkit

• Engaging with companies: how we build our understanding of a company’s approach to governance and sustainable business models, and how we communicate our views and ensure companies understand our expectations.
• Voting in our clients’ interest: how we signal our support for or raise our concerns over a company’s corporate governance or business operations. Where we have concerns, we may vote against directors or other management proposals, or in support of a shareholder proposal. We employ votes against directors more frequently since that is a globally available signal of concern.
• Transparency in our activities: how stakeholders are informed on our work to advance the long-term economic interests of our clients. We continue to raise the bar on our transparency with the publication of comprehensive reports, our voting record, and through our regularly updated vote bulletin library.

Find out more about BlackRock’s Stewardship team and how the team voted at various shareholder meetings.