For professional clients only.
Capital at risk. This information should not be relied upon as investment advice, or a recommendation regarding any products or strategies. 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.
Here are the five reasons why we believe sustainable indexing gives investors the clarity they need to build more sustainable portfolios.
1. Sustainable indexing can help provide a consistent approach across a portfolio.
As investors transition to sustainable investing, an indexing approach may help to ensure that sustainability is expressed in a consistent way across the entire portfolio. Indices are inherently rules-based, so the screens and ESG integration they deploy are repeatable, regardless of asset class or exposure.
2. Indexing puts you in control of what type of sustainable investor you want to be.
Sustainable investing is not one size fits all, and means different things to different investors. The broad range of indices available and the transparency they offer allow you to pick the approach that’s appropriate for your portfolio.
3. Sustainable indexing drives industry standardisation, promotes disclosure and can help motivate better corporate behavior.
We believe that indexing is bringing clarity to the sustainable investing space by providing transparency and accelerating the adoption of new market standards. This is one of many reasons why we believe investors will choose to put USD $1 trillion into sustainable index assets in the next decade.
4. Sustainable indices have shown resilience in difficult times.
During last year’s market dislocation, a majority of sustainable indices exhibited resilience relative to broad market benchmarks.* We believe that this is because sustainable indices are generally comprised of companies with higher profitability and lower levels of leverage than the broader market.
Risk: Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
*Source: BlackRock with Q1 2020 data from Bloomberg and Morningstar as of May 7, 2020. Over 90% of sustainable indices outperformed their parent benchmark during this period of heightened market uncertainty and drawdown
5. Index fund asset managers with active investment stewardship seek to drive long-term change.
Indexing amplifies the impact of company engagements because index investors typically take a long-term view. Those who are sustainability-minded can exercise influence with companies through engagements across environmental, social and governance topics.
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. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. Until 31 December 2020, issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL, Tel: + 44 (0)20 77433000. Registered in England and Wales No. 02020394. For your protection, telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock. From 1 January 2021, in the event the United Kingdom and the European Union do not enter into an arrangement which permits United Kingdom firms to offer and provide financial services into the European Economic Area, the issuer of this material is: (i) BlackRock Investment Management (UK) Limited for all outside of the European Economic Area; and (ii) BlackRock B.V. (Netherlands) for all in the European Economic Area. BlackRock (Netherlands) B.V. is authorised and regulated by the Netherlands Authority for the Financial Markets. Registered office: Amstelplein 1, 1096 HA, Amsterdam, Tel: 020 – 549 5200,Tel: 31-20-549-5200. Trade Register No. 17068311. For your protection, telephone calls are usually recorded. © 2021 BlackRock, Inc. All Rights Reserved. 1614361