Investors representing $ 25 trillion in managed assets testify: “We plan to double the amount of our ESG (environment, company and government) assets within five years.” This is according to a survey conducted by the investment management corporation BlackRock. Investors’ main concern (88%) is about climate-related risks – concerns about the quality of sustainability data are the biggest barrier to investing in ESG assets.
The global health and economic challenges that have arisen this year have not slowed down the demand of investors and their desire for investments with sustainable characteristics, according to the Global Survey of Investments in ESG of BlackRock customers. In fact, investors plan to double their investments in products with sustainability characteristics over the next five years, with 20% saying the epidemic will even accelerate their allocations to sustainable investments.
“The tectonic shift we identified earlier this year has certainly caught on. Political and regulatory pressures, technological developments and customer preferences have contributed to the field of sustainability entering the mainstream of investment,” says Mark McCombi, BlackRock chief executive. “The results of our survey show that the transition to ESG investments is taking place all over the world.” While growth in sustainable assets is mainly reflected in Europe, its prominence is also growing in the Americas, Asia and the Pacific.
The survey combines insights from 425 investors in 27 countries, and includes executives of corporate and public pension plans, financial asset management companies, funds, institutions and global capital. Most survey respondents believe that sustainability is essential to investment processes and their results, and 75% are already taking or will consider taking an integrated approach in the future, taking into account ESG-related risks in their investment portfolios. The integrated approach examines the ESG criteria in all portfolio holdings, and future investment decisions from a sustainable holistic perspective.
Rise in social value
An unprecedented report by the US administration stated last September that the climate crisis endangers the stability of the entire financial system, and could dramatically affect real estate prices and capital markets. In Israel, the Supervisor of Banks, Yair Avidan, this month called on bank leaders to focus on environmental risk management And participate in the effort to direct capital to ‘green’ funding.
But a Blackrock poll may indicate the power of public outcry. The main reason provided by respondents (51%) for adopting existing strategies is that “this is the right thing to do”, while only 37% of respondents said that “reducing investment risk” was a key consideration.
In the U.S. and the Americas, investment risk reduction is the second highest motivation for adopting a sustainability strategy (49%), followed by “better risk-adjusted performance” and “guidance from the board of directors or management” (both stood at 45%). In Asia and the Pacific, demand The customers for adopting an sustainability strategy is the lowest among the three areas, only 19%.
One area that clients from all over the world agree on is when examining investment risks, one must first look at climate-related risks. Looking ahead, while climate is expected to remain the main concern, 58% of survey respondents said they expect concerns on social issues such as diversity and acceptance of the other, as well as fair employment conditions, to rise most significantly in the next 3-5 years.
BlackRock is the largest financial asset management corporation in the world, managing assets worth about $ 8 trillion. About a year ago, CEO Larry Fink announced that climate change has become a defining factor in long-term plans for companies, and that the risk is not yet reflected in the markets – but it’s time to change that. Therefore, BlackRock decided to exit coal-based investments in direct portfolios. And in portfolios to exit investments in companies whose 25% of profits are from thermal coal, and to place under ‘voting summary’ in 2021 companies that will not show significant progress in the climate field.
Fink’s statement came after sharp criticism and active protest by environmental activists against the company, who blamed it for environmental disasters because it diverts a large chunk of the amount it manages to funds investing in fossil fuel companies. BlackRock now indicates that there has been a 288% increase in the number of reporters on the subject in the fund’s membership portfolio.
According to Anat Levin, CEO of BlackRock Israel, “When you look at the world of investments, we see that the understanding that ESG considerations are an important part of our conduct is permeating. “The corona has been another wake-up call for the world, and we anticipate that the acceleration it has created for ESG-coordinated investments as well as for integral changes that companies will make will continue with us even after the virus disappears.”
Levin also notes that the mechanisms introduced by the fund last year can prevent ‘manipulation’ of companies, and prevent a situation of unreliable reporting on climate action. “The way we exercise the right to vote as investors’ representatives is an essential component of our responsibility and the prevention of green wash. We engage in dialogue with companies to understand whether they are conducting proper disclosure and appropriate risk management regarding sustainability. We have a responsibility to charge them if they do not.” This, by voting for a firefighter.
“This year we have identified 244 companies that are not progressing satisfactorily for us in combining climate risks in their business models or in their disclosures of information, and this will affect how we vote in 2021.”
Dr. Shiri Tzemach Shamir, an environmental economist from the Interdisciplinary Center in Herzliya, says that responsible investments certainly accelerate the internalization of environmental damage and the importance of elements of sustainability that must be taken into account.
“It is unfortunate to see that only another crisis (the corona) causes investors to address the climate crisis. The crisis has been with us for years, and its impact is more significant and longer-lasting than the corona. In general, social issues such as inequality, acceptance of the other, terms of employment, all “Part of the SDGs, as well as climate change. Therefore, all things must be treated as one piece, as the impact of the climate crisis is local, national and global. Social investments need a holistic and inclusive vision must push for change as soon as possible.”