PI Partnership – BlackRock SUSTAINABILITY TRENDS FOR 2021
Thomas Fekete, managing director, BlackRock head of sustainable investment solutions for EMEA and APAC
We have reached an inflection point in sustainability. The tremendous toll of the COVID-19 crisis – on health, economic well-being, and everyday activity – has precipitated a widespread reassessment of the way we live our lives. This has led to both a greater awareness of the sources of resilience for investors and governments and a desire to associate with more sus- tainable organizations for businesses and consumers. As we head into 2021, we have identified five trends which we believe will shape sustainable investing next year.
1. The tectonic shift towards sustainabili- ty is reflected in shifting preferences and flows into sustainable assets. 2020 has been a record setting year for organic as- set growth in sustainable strategies, with global investors pouring approximately US$203 billion
in sustainable mutual
funds and ETFs¹. Total sustainable assets under management now surpass US$1.8 trillion dollars in the mutual fund and ETF market¹. This shift held even in times of uncertainty – as investors sought to rebalance their portfolios in Q1 2020 market turmoil, they increasingly pre- ferred sustainable funds over more tradi- tional ones. And according to the results from BlackRock’s Global Sustainable In- vesting Survey, this trend is only set to grow. Respondents representing US$25 trillion in AUM across 27 countries ex- pect to double their sustainable assets un- der management, on average, in the next five years².
2. Climate change remains ever in focus with society ringing the alarm bells about the urgency of curbing emissions. Bold commitments from governments such as China and the United Kingdom signal a new phase of action against climate change, after years of perceived inaction following the signing of the Paris Agree- ment. With a new US administration
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promising to rejoin the Accords (more on that below), we could be seeing more reg- ulatory action and global coordination on the climate next year.
Institutional investors have assumed the mantle in climate leadership, joining forces in efforts to better define and meas- ure a portfolio’s impact on climate change, including recent efforts from or- ganizations such as the TCFD³ and IIGCC⁴. Investors have also taken a hard- er stance on high carbon emitting energy sources such as thermal coal, with Black- Rock exiting from producers that generated more than 25% of their reve- nue and coalitions such as the Net Zero Asset Owners Alliance publishing their recent position on thermal coal⁵. We see more and more clients looking to understand the impact of climate change on their portfolio and seeking innovative solutions to mitigate that impact. We believe this will be at the forefront of in- vestment discussions next year.
3. Efforts abound in creating standardiza- tion across various sustainability report- ing frameworks. A key ingredient in this effort will be achieving a common under- standing – across asset owners, asset managers, other market participants and regulators – of what is expected from financial products that offer exposure to sustainable investment themes and what is expected from corporates who are be- ginning to release greater sustainability disclosures.
2020 saw the beginning of these efforts, with organizations such as CDP, CDSB, GRI, IIRC, and SASB signing a statement of intent to find greater harmonization amongst the voluntary frameworks⁶. Gov- ernments are also increasingly supportive of these voluntary frameworks, with the UK announcing its intention to make TCFD-aligned disclosures mandatory across the economy by 2025. These types
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